Contents 1 Guatemala at a glance 1.1
Country Profile
1.2
Economy (2009)
1.3
Holidays
2
7 Establishing a business
2
7.1
Forms of commercial organization
2
7.2
Tributary Regime
2
2 Cultural, political and economic context
2
3 Central America: Total population, 2010 (In thousands of people)
9 10
8 Employment and social security
10
8.1
Hiring
10
8.2
Salaries
10
8.3
Terminating
11
9 Foreigners living in Guatemala
11
3.1
Political situation
3.2
Monetary, exchange and financial framework
3
9.1
3.3
Productive sector
4
10 Lifestyle
4 Trade Liberalization
4
10.1
Where to Live
4
10.2
Rent terms
10.3
Banking services
13
10.4
Postal Services
13
5
10.5
Business Etiquette
13
10.6
Education
13
10.7
Health
14
10.8
Nightlife
14
10.9
De compras en Guatemala
4.1
Imports and exports
4.2
Preferential access to markets
5 Infrastructure
3
9
5
Types and processes for visas
12 13
Telecommunications
5
5.2
Electricity
6
5.3
Ports
5.4
Airports
7
5.5
Highways
7
7
11.1
Principales Destinos Tur铆sticos
7
11.2
Deportes
6 Investments
6
6.1
Law of Foreign Investment and Free Currency Trade
6.2
Special regimes for promoting
exports and attracting investment
11
12
5.1
14
11 Turismo y Recreaci贸n
14
14 15
8
1
1 Guatemala at a glance 1.1
Country Profile
Official Name:
Republic of Guatemala
Capital
Guatemala
Official language
Spanish
Form of government
Republic separated into Executive, Judicial and Legislative Bodies.
US$4,927.6 million
Exports (FOB)
US$7,360.2 million
Imports (CIF)
US$11,520.7 million
Source: Bank of Guatemala * International Monetary Fund
1.3
Holidays January
01
New Year’s Day
April
01
Holy Thursday
April
02
Good Friday
April
03
Holy Saturday
Currency
Quetzal (Q.) Q. 8.35439 for US$1 (by December 31, 2009)
Population (2010) Population growth
14,361,666 2.5%
May
01
Labor Day
June
30
Armed Forces Day
Geographic coordinates
15’ 30 N, 90’ 15 O.
July
01
Banking holiday
August
15
Day of the Assumption (Guatemala City)
September
15
Independence Day
October
12
Hispanic Day
October
20
Revolution of 1944
Location
Territory
1.2
Foreign debt
Guatemala has coasts to the South with the Pacific Ocean and to the North with the Caribbean Sea. Towards the West and Northwest it borders with Mexico, to the Northeast with Belize and towards the East with Honduras and El Salvador. total: mainland: water: 460 km2
108,890 108,430
km2 km2
+502 + number
Time
GMT -6:00
Electricity
110 volts, 60 cycles
Working hours
Government: 9:00 a.m. to 5:00 p.m. Business: 8:00 a.m. to 5:00p.m. Commerce: 10:00 a.m. to 8:00 p.m.
Economy (2009) Income per capita* GNP growth rate Inflation Exchange rate (per US$1.00 by December 31 2009) Net international reserves
01
All Saints Day
24
Christmas Eve (half day)
December
25
Christmas
December
31
New Year’s Eve (half day)
2 Cultural, political and economic context
International area code
Gross National Product (GNP)*
November December
US$37,289.8 million US$2,601.872 0.6% -0.28% Q8.35439 US$4,658.8 million
Guatemala, with its striving economy, is a culturally diverse country that has been blessed by nature. Its weather is as diverse as its population, from warm weather in the Southern coast, to cool temperatures in the highlands, to rainforests in the North and deserts in the East. Its economy, the largest in Central America, is broadly diversified in destinations and products. Also, the macroeconomic stability is widely acknowledged, it has one of the lowest inflation and growth volatility rates in Latin America. Its location is also enviable: in the center of the American continent it borders directly with the largest common market in the world, the North American Free Trade Agreement- NAFTA-. It also has coasts on the Pacific Ocean and the Caribbean Sea. Also, when we mention that Guatemala has the largest economy in Central America, we are not just referring to its production volume, but to its population as well. It has the largest number of inhabitants, exceeding 14 million in 2010; and it also has the greatest cultural diversity: even though
2
Spanish is the official language, another 23 local languages coexist in the same territory. This allows rich traditions and customs that are unique in the Central American region.
3 Central America: Total population, 2010 (In thousands of people)
members of Central American Parliament are also elected during the general elections. In the case of the President of the Republic, if a candidate does not reach at least 50% plus one of all votes, a second electoral round is programmed between the candidates in first and second place. Its worth mentioning that the electoral processes of the last decades have been carried out with transparency and with a large participation of voters. The construction of solid political institutions has allowed the country to comfortably integrate into the regionalization and globalization processes. Among others, Guatemala is an active member of the World Trade Organization- WTO- and the Central American Integration System – (SICA in Spanish)-, frameworks that protect and encourage international trade and investment. 3.2
Monetary, exchange and financial framework
Guatemala’s Monetary, Commercial and Financial Policy is determined by the Monetary Board, which is integrated by the Ministers of Public Finance, Agriculture, Livestock and Food, and Economy, a representative of the private sector, the private banking sector and the national university (San Carlos University), a member of Congress and the President of the Bank of Guatemala. Source: CEPAL-CELADE
Another of the riches the country has in terms of population is its youth. The population pyramid of Guatemala shows a high concentration at its base. Of an estimated population for 2010 of 14.4 million, 70% will be under 30 and, a little over half (53%) will be under 20. In general, Guatemala can be considered a young country. 3.1
Political situation
Guatemala has consolidated a democratic regime that has evolved without interruption for many decades. The Government maintains a robust balance, of parts and counterparts, among its three basic bodies: Executive, Legislative and Judicial. The basic legal framework of the Republic is set by the Political Constitution, which guarantees human, legal, political and economic rights. The Executive power is exercised by the President of the Republic, who is elected every four years. The next elections will be held in 2011, to assume office in January 14, 2012. The Congress of the Republic is formed by 158 congressmen and women, who are all reelected during the same Presidential election. The Judicial Body is governed by 13 magistrates who form the Supreme Court of Justice and are designated by Congress every five years. The next Supreme Court election will be held in 2014. Besides electing the President and members of Congress, mayors and
The entity in charge of implementing the Monetary, Commercial and Financial Policy is the Bank of Guatemala, which is governed by the Political Constitution of the Republic and its Organic Law (Decree 16-2002). An important characteristic of the monetary policy worth mentioning is that, by constitutional rule, there is a prohibition on financing the fiscal deficit by issuing currency. This has allowed a credible commitment on behalf of the monetary authority regarding low and stable inflation, its main objective. Regarding the exchange rate, Guatemala maintains a free floating system, with a daily exchange rate of the US Dollar. Although the possibility of intervention in the exchange markets by the monetary authorities exists, it’s limited to stabilizing sudden changes due to contextual motives and not interfere in market trend. Another important characteristic of the exchange system in Guatemala is that there is free currency trade. Because of this, private contracts may be negotiated in the currency that parties choose and there is no obligation to pay them in Quetzals unless the terms of the negotiation state otherwise. The financial sector in Guatemala has demonstrated being very dynamic and stable over the course of time; first because it’s characterized by solid institutions and also because it is supported by a modern legislation that aspires to implement the strictest requirements in international financial best practices. During the past decade there have been important financial and institutional changes that place Guatemala at the forefront of best financial practices in Central and Latin America. Currently, the sector has 18 banks, 15 financiers, 15 bonded warehouses, 17 insurance companies, 12 brokerage firms, 11 bond companies, 8 off shore banks, 7 credit card issuers,
3
1 currency exchange and a number of leasing companies. La majority of these institutions are organized in ten financial groups, clearly identified and supervised by the corresponding authorities. For 2010, the main characteristics of the Monetary, Exchange and Credit Policy are the following: Inflation goal (December 31, 2010) Money growth (M2) Private Sector Credit Growth Bank reserve
3.3
5.0% +/- 1% 10% - 12% 6% -8% 14.6%
Productive sector
As previously mentioned, Guatemala’s economy is the largest in Central America in terms of production, with and Gross National Product of US$37,289.8 million. Also, it is the second largest in terms of foreign trade, with exports over US$7,360.2 million and imports of US$11,520.7 million. It has also demonstrated being very robust facing the economic crisis of the past years. In spite of the global economic crisis of 2008-2009, last year Guatemala had the highest growth rate in the Central American region, 0.6%. This has been a very constant characteristic: different than the rest of Central America, and even Latin America, Guatemalan economy has been very stable. In general, the economic policies have been conservative, laying the foundation for its solid growth. Due to the latter, Guatemala has the largest international reserve fund, US$4,658.8 million, and one of the lowest levels of public foreign debt in Latin America (12.5% of GNP). In total, public debt barely reaches 22.1% of GNP. In Central America only Honduras has a lower level because its debt was condoned because of its HIPC status.
Central America: Main macroeconomic variables Year 2009
Guatemala
El Salvador2
Honduras
Nicaragua
Costa Rica
GNP (US$ billion)¹
37.3
22.7
14.4
6.1
29.3
GNP Growth Rate¹
0.6
-1.0
-2.1
-1.5
-1.3
Foreign debt (% of GNP)
12.9
25.9
17.0
58.6
12.1
Total Debt (% of GNP)
27.5
36.6
24.8
78.3
42.9
International reserve (US$ billion)
5.1
2.8
2.1
1.3
4.1
Exports (US$ billion)
7.4
3.8
2.3
2.4
8.7
Imports (US$ billion)
11.5
7.3
6.1
4.2
11.4
Deficit current account (% of GNP)¹
-1.0
n.a
-4.0
-12.9%
n.a
*Source: central Bank of each country.¹ Preliminary data 2 Estimated data of GNP, GNP Growth Rate, Foreign Debt and Total Debtn.a = not available
The trade liberalization in Central and Latin America brought many challenges with it, which Guatemala has been able to face in a timely manner. During the past three decades the Guatemalan economy has not only grown but diversified: it went from being mainly agricultural to industrialized and strong in services. Industry represents 22% of total production. Among the important industrial sub sectors worth mentioning are foods and beverages, light manufacturing, chemicals and medicines, and forestry and wood products. Some of the attractive features of business and investment opportunities for these sectors are: •
Strategic geographic position
•
Competitive costs
•
Free trade agreements with main global markets
•
Technical training centers
•
Competitive and efficient manual labor costs
•
Fiscal incentives
4
• Gross National Product, 2009 By Sectors Public Admin. 7%
Agriculture 14%
Private services 16%
Industry* 22% Rent for housing 10% Financial services 4%
Construction 3%
Transportation 11%
Commerce 12%
Source: BANGUAT * Includes Manufacturing Industry, Mines and Quarries, and Electricity and Potable Water
4 Trade Liberalization 4.1
Imports and exports
During the past 25 years Guatemala has gone through a fast trade liberalization process and consequently, of economic growth, based on diversification, productivity and technological innovation. In 1986, 65% of exports were traditional agricultural products, such as coffee, sugar, banana and cardamom. Currently, exports of these products represent 28% of exports total, giving way to trade of other products such as textiles, manufacturing, minerals, food products, chemical products, fruits and vegetables, among others. To date, Guatemala exports over 4,075 different products, to more than 131 markets worldwide, and has more than 3,879 companies that promote Guatemalan business. The country has been able to take advantage of its vast biodiversity, more than 19 different ecosystems and micro climates that encourage its culture and agricultural exporting vocation. Also, Guatemala has people with a high learning potential; a transformational human platform, at management and operating levels, and the largest university level population in the region.
Trade of the Republic of Guatemala In millions of US$. Source: BANGUAT
4.2
Preferential access to markets
Since the mid 80s, the foreign trade policy established three objectives: 1) increase foreign trade; 2) diversify merchandise exported; 3) diversify the destination of said merchandise. In general, Guatemala has had a very active trade liberalization policy. Currently, it is estimated that the average tariff is 2.5% and the effective average tariff is 10.4%. From these figures it is clear to see that Guatemala is a country open to foreign trade, an important number of imported merchandise are exempt, and those that actually pay, are relatively small sums. In Guatemala there are no export tariffs. Guatemala is a member of the World Trade Organization – WTO- since its founding. Within this framework, Guatemala has promoted a series of trade agreements with other countries and regions. In general, these agreements cover over 80% of Guatemalan trade, and include the main global markets, such as the United States and soon, the European Union.
5
Mobile
Agreements signed and ratified, current:
3,168,256
4,510,067
Central American Integration System
18.0%
24,221,807
FTA with United States
38.5%
308,918,000
FTA with Dominican Republic
0.6%
10,090,000
FTA with Taiwan
0.6%
23,119,772
FTA with Mexico
9.0%
107,550,697
Source: Superintendence of Telecommunications
FTA with Panama
3.0%
3,454,000
FTA with Colombia
2.0%
45,363,000
Regarding telecommunications tariffs, on mobile lines the minute may cost between Q0.24 (US$0.029) and Q1.80 (US$0.30), depending on the operator and service contracted (post or pre-paid, residential or corporate). Fixed lines for residential services can be procured from Q0.17 (US$0.02) per minute. For international dialing, services can be procured from Q0.625 (US$0.075) per minute, depending on the destination of the calls. Internet for residential users can be procured for approximately US$15.00 per month.
FTA with Chile
1.2%
17,049,000
PSA with Cuba
0.1%
11,204,000
PSA with Venezuela
0.1%
28,710,000
PSA with Belize
0.3%
322,100
Agreements being Negotiated: FTA with CARICOM
1.3%
19,515,052
AA with European Union
6.5%
501,259,840
FTA with Canada
1.1%
34,042,000 Source: Own source with information from the Bank of Guatemala and United Nations.1/ Exports plus imports with each country divided exports plus total imports.
5 Infrastructure 5.1
2,034,777
Telecommunications
In telecommunications, Guatemala has one of the most modern and avantgarde legislations worldwide. The Law of Telecommunications regulates the exploitation of the radio electric spectrum as well as telecommunications, promoting private participation and competition among operators. This reform, carried out almost fifteen years ago, allowed the country to have not only one of the most modern and broad networks in the Latin American region, but also one of the lowest costs for the user, even worldwide. Currently, there are 18 fixed telephone operators, 3 mobile and 16 operators of international ports, who operate more than 17 million telephone lines.
Number of telephone lines (fixed and mobile) Telephone Fixed
2003 944,176
2004 1,132,121
2005 1,248,161
2006
2007
2008*
JUN-09*
1,354,926
1,413,695
1,449,364
1,181,054
7,178,745
11,897,563
14,948,640
15,939,932
The modern telecommunications network and its low cost have had a direct effect improving competitiveness of companies in Guatemala, but it has also had indirect effects, that although unforeseen, have also been very positive. This has allowed the development of industries such as call centers and Business Process Outsourcing – BPOs- which have been significant support for national and international industries, providing world class services. 5.2
Electricity
The electric sector of Guatemala has developed since 1996 based on a new legislation which allowed the active participation of the private sector in the sector. The National Electric Energy Commission (CNEE in Spanish) www. cnee.gob.gt is the regulating entity, and the Administrator of the Wholesale Market (AMM in Spanish) www.amm.org.gt is the entity responsible for the operation of the national electric system. During 2008, the electric sector generated 8,000 kW h of energy, which origin was the following: 46% hydraulic, 26% external combustion motors; 13% steam turbines, 11% de biomass and 4% from geothermal and gas turbines. The energy growth rates have been an annual average of 7%, trend that has been interrupted by the global economic crisis. The operable installed capacity of the system was 2,029 MW fro the period November to April and 1,799 MW from May to October. The annual load factor estimated for the system was 62.46%. The maximum demand was 1,430 MW and 122MW of generation where incorporated to the Wholesale Market. In 2009 CNEE held an international public call for the construction of 1,400 km of transmission lines, which will contribute to bring the transmission system closer to the potential of hydraulic generation that the country has, making investment in hydraulic generation more feasible and therefore
6
taking advantage of such potential. Also this extension will improve trustworthiness in the transportation system and guarantees supply of electricity in consumption centers. According to the legislation, there are two types of consumers. Regulated consumers are those that have a potency demand up to 100 KW and are catered to by the distributing companies and are subject to the electric tariffs issued by the CNEE; the distributors have different tariffs, according to the potency demand. Prices of tariffs are adjusted quarterly. To obtain the current tariffs and estimate the cost of electric energy, we recommend you visit the CNEE site: www.cnee.gob.gt
bulk, solids and containers, among others. Puerto Quetzal has the capacity to mobilize 824 thousand metric tons per year in containers. The country’s ports allow easy access for conventional, container, roll on/ roll off, refrigerated, transport of bulk products (solids and liquids) and cruise ships. The efficiency of the national port system is such that over 23 internationally renowned maritime shipping companies offer transportation to the main ports in the world.
Guatemala: Structure of Foreign Trade by Ports 2007
Consumers who have a potency demand greater than 100 KW are called Large Users, (GU in Spanish) and can buy their energy and potency directly from the Wholesale Market or through an electric energy commercializing company. In this case price and conditions of supply are agreed upon freely between the parties. Detailed information on the Wholesale Market is available on the Wholesale Market Association website, (AMM in Spanish) www.amm.org.gt
21%
1%
Large Users, the same as distribution companies, are obligated to hire their potency with a minimum of two years anticipation. For 2010 the tender for potency and energy supply for distribution companies will be out, requirement estimated at 200 MW. The electric sector is very dynamic and more competitive each day; offering interesting opportunities for investment.
Air Sea
78%
There is an Law of Incentives for Development of Renewable Energy Projects, Decree 52-2003 issued by Congress, which promotes the participation of investors who are interested in the renewable energy sector, it takes into consideration that Guatemala has enough renewable natural resources in quality and quantity and their development and use will give the country greater independence in purchase of fossil fuels, improving the quality of the country’s environment. 5.3
Source: National Port Commission
Estimated transit times for maritime transportation Port from Guatemala
Ports
Guatemala has diverse comparative advantages regarding other countries and one of them is the strategic location in the central zone of the American continent. This location allows access to both oceans. The national ports handle 78% of the total load of foreign trade of the country. Currently there are three working multi-purpose ports with international standards, one on the Pacific and two on the Atlantic coast. Puerto Santo Tomas de Castilla and Puerto Barrios are located on the Atlantic coast at 297 km from Guatemala City. It is important to mention that Puerto Santo Tomas de Castilla is specialized in handling containers, with annual cargo traffic of 2.4 million metric tons. Puerto Barrios also handles mainly cargo in containers, which represent 1.8 million metric tons per year. Puerto Quetzal is located on the Pacific Coast at 98 km from Guatemala City. The commercial pier of this port has 4 docks to handle general cargo,
Land
Destination
Time
Sto. Tomás de Castilla, Atlantic Ocean
Miami, Florida
3 days
Sto. Tomás de Castilla, Atlantic Ocean
New Orleans, Louisiana
4 days
Sto. Tomás de Castilla, Atlantic Ocean
Rotterdam, Holland
22 days
Quetzal, Pacific Ocean Quetzal, Pacific Ocean
Kaohsiung, Taiwan Kobe, Japan
31 days 23 days
Quetzal, Pacific Ocean
Los Angeles, California
4 days
Source: Invest in Guatemala
5.4
Airports
The main airport of the country is La Aurora, which was remodeled in 2007, making it the most modern and efficient in the Central American region. It has the capacity to receive 4 million passengers a year, more than 160 flights a week and has direct connection with 6 cities (United States, Mexico,
7
Central America, Peru and Spain). This airport is certified “Category 1” by the Federal Aviation Administration (FAA). Also, it is important to highlight that it has 24 points of customs control and the capacity to cater 22 airplanes simultaneously. The second international airport is located at 507 km from Guatemala City, in the department of Petén: Mundo Maya airport. It is used mainly by tourists interested in visiting Tikal and other tourist destinations in the Mayan World and the Northern part of the country. There are also airports located in the following cities: Quetzaltenango, Huehuetenango, Retalhuleu, San Marcos, Coatepeque, Puerto de San José and Puerto Barrios. The efficiency of cargo handling at the airport is one of the highest in Latin America. The majority of cargo, exports as well as imports, are received, stored, controlled, safeguarded and delivered by COMBEX-IM (www. combexim.com.gt). This is a non-profit organization, managed by the Guatemalan private sector whose vision and purpose is to “offer the local an international markets an organizational model that satisfies the demands of trustworthy handling of their merchandise, with human and technological resources that respond to these expectations”. This service model has proven being not only trustworthy and secure, but also efficient in merchandise delivery times at the lowest cost in the Central and probably Latin American region. Also, its facilities are adapted to handle all types of merchandise: risk or dangerous cargo, valuable cargo, general cargo and perishables in an uninterrupted manner, 24 hours a day, 365 days a year. 5.5
Highways
Regarding highway infrastructure, Guatemala has more than 6,418.11 km of paved highways connecting its different regions, ports and borders with Mexico and Central America. There are also 5,126.9 km of dirt roads and 3,642.69 km of rural roads. At the Central American level, this is one of the largest, modern and functional highway systems. In part, it is due to the Government’s commitment to investing in infrastructure, and also, the modality of private participation in construction, maintenance and cleaning of roads and highways. Through tender, investments have been more efficient, obtaining higher quality at a lower cost www.covial.gob.gt
6 Investments 6.1
Law of Foreign Investment and Free Currency Trade
The Law of Foreign Investment, Decree 9-98, protects the international investor and his investments against any arbitrary or discriminatory act by public action. Specifically, it grants the same rights and obligations of any
national investor. Among the stipulations in this Law, article 8 specifically mentions that “the foreign investor has free access to purchase and sale of available foreign currency and to free currency trade; according to what is prescribed in special laws on the issue of trade and in conditions equal to the national investor. Among other things, the foreign investor may freely perform: a) Foreign transfers related to his invested capital, or due to dissolution and liquidation or voluntary sale of the foreign investment; b)
Remission of any profit or revenue generated in national territory;
c) Payment and remission of dividends, debt contracted abroad and the interests obtained because of them, royalties, income and technical assistance; d)
Payments derived from compensation due to expropriation.”
The Law of Free Currency Trade, Decree 94-2000, guarantees “the free disposal, possession, contract, remittance, transfer, purchase, charge and payment of and with foreign currency…” It also establishes that “possession and handling of deposits and accounts in foreign currency as well as financial intermediation operations, are equally free in national as in foreign banks.” Another important point of this law is that “any person, individual or legal, may freely and of mutual agreement pact the payment of fees, salaries, wages or commissions he or she has a right to for services rendered or labor, in foreign currency….” Additionally, the free trade agreements that Guatemala has signed with other countries and regions include a section on protection of investments. Also, Guatemala has signed and ratified bilateral agreements of protection of investments with the following countries: Argentina, Belgium and Luxemburg, Chile, Czech Republic, Finland, France, Germany, Italy, Taiwan, Republic of Korea, Holland, Spain, Sweden and Switzerland 6.2
Special regimes for promoting exports and attracting investment
The main instruments for promoting exports and attracting investments are the following: • Law of Promotion and Development of Export Activities and Production (Decree 29-89) • Promotion of Duty Free Zones: Law of Duty Free Zones, Decree 65-89, Organic Law of the Free Zone of Industry and Commerce Santo Tomás de Castilla (ZOLIC, in Spanish), Decree 22-73; and Organic Law of the Duty Free Zone of Industry and Commerce of Puerto Champerico, Decree 27-96.
8
6.2.1 Law of Promotion and Development of Export Activities and Production (Decree 29-89) Decree 29-89, issued on May 23, 1989, mentions in its Article 1 that “its objective is to promote, encourage and develop in the national customs territory, the production of merchandise destined to countries outside the Central American area, as well as regulate the operation of the export activity or production of the companies within the framework of the Active Improvement or Export of Total National Added Component regimes”. To achieve its objectives, in Decree 29-89 four regimes are created, with specific requirements and benefits (Article 5): a)
Temporary Admission Regime.
b)
Return of Rights Regime
c)
Replacement of Duty Franchise Regime
d)
Export of Total National Added Component Regime
In general, when availing these regimes, companies may take advantage of the following benefits: temporary suspension of payment of VAT and duty rights to import raw materials, intermediate products, etc. and which will be exported again in less than a year; exoneration of Duty Rights and VAT for imports of machinery and equipment; exoneration of Income Tax (ISR in Spanish) for profits from exports for 10 years; and others. 6.2.2
Law of Duty Free Zones (Decree 65-89)
The Law of Duty Free Zones (Decree 65-89), issued on November 14, 1989, has the objective, according to Article 1, of “provide incentive and regulate the establishment in the country of Duty Free Zones, which promote national development through activities carried out within them, particularly those tending to strengthen foreign trade, generate employment and transfer of technology”. It acknowledges three types of users: a) Industrial: When dedicated to production or ensemble of goods for export outside the national customs territory, re-export, or technological research and development. b) trade.
Services: When dedicated to rendering services related to foreign
c) Commercial: When dedicated to merchandising of good destined to export outside the national customs territory, as well as re-export without performing activities that change the characteristics of the product or alter its origin.
Benefits of the Duty Free Zone (Decree 65-89) The following are among the benefits for companies covered under Decree 65-89: 1) Administrative entity of duty free zone: a) Exoneration of taxes, duty rights and charges applicable to imports of machinery, equipment, tools and materials destined exclusively to the construction of infrastructure, buildings and facilities used for the development of the duty free zone. b) Exoneration of Income Tax caused by income derived exclusively from the activity as Administrative Entity, for 10 years. c) Exoneration of the Sole Real Estate Tax d) Total exoneration of taxes, duty rights and other charges applicable to import and consumption of fuel oil, bunker, butane and propane gas, necessary for the generation of electricity used for the operation and service rendering of the users of the duty free zone. 2) Industrial and services users in Duty Free Zones: a) Not affected by payments of taxes, duty rights, and charges applicable to import of machinery, equipment, tools, raw materials, inputs, semi elaborated products, containers, packaging, components, and in general merchandise that is used in the production of goods and in the provision of merchandise. b) Exoneration of Income Tax caused by income generated exclusively by the activity as a user of the duty free zone, for a period of 10 years. c) Exoneration of VAT, in merchandise transfer carried out within and between duty free zones. 3) Commercial users in duty free zones: a) Not affected by payments of taxes, duty rights, and charges applicable to import of merchandise or components stored in the duty free zone for commercialization. b) Exoneration of Income Tax caused by income generated exclusively by the activity as a user of the duty free zone, for a period of 25 years c) Exoneration of VAT, in merchandise transfer carried out within and between duty free zones. Source: Own elaboration with information from Decree 65-89.
9
7 Establishing a business Guatemala is a foreign investment-friendly country. According to existing legislation, the international investor has the same rights and forms of exercising them as the locals (Decree 9-98). Therefore, a company may be foreign or domestic and register as an individual or commercial company. To register, our suggestion is to use the Agile Window of the Mercantile Registry, where in one step, the following processes can be completed: 1. Registration of a trading company in the Mercantile Registry (including the publication of the proclamation of the Company Formation in the Diario de Centro América)
can be presented at the Agile Window of the Mercantile Registry and in 24 hours1 begin operating, having registered in one step at the Mercantile Registry, the Superintendence of Tax Administration, and the Guatemalan Institute of Social Security, as well as complying with the requirement of posting in the Diario de Centro América. 7.2
Tributary Regime
The principal taxes in Guatemala are the following: 7.2.1
Income Tax
2.
Registration of a commercial auxiliary in the Mercantile Registry
This tax affects income and profits from capital obtained in Guatemala. The taxpayer can choose from two regimes.
3.
Registration as individual merchant in the Mercantile Registry
4.
Registration as commercial business in the Mercantile Registry
Under the general regime, tax is 5% of gross profit, minus income exempt and is paid monthly.
5. Registration as taxpayer in the Unified Tax Registry (NIT in Spanish) in the Superintendence of Tax Administration (SAT in Spanish) 6. Registration as employer under the regime of Social Security (Guatemalan Institute of Social Security) (IGSS in Spanish) 7. Authorization of mechanical and computerized registers (not integrated systems) at SAT 8.
Authorization for printing and use of documents and forms at SAT
9.
Authorization of books at SAT
10.
Authorization of books at the Mercantile Registry
7.1
Forms of commercial organization
The Commercial Code of Guatemala (article 655) acknowledges as a commercial business “the collection of work, material elements and coordinated incorporeal values, to offer the public, with purpose of profit and in a systematic manner, goods or services”. Also, it acknowledges that they may be the property of individual persons or trading companies (public corporations). Trading companies can also be foreign. The main difference is that it has to present a bond to guarantee fulfillment of its obligations assumed in the Republic of Guatemala, for the amount of USD$50,000.00 payable to the State of Guatemala. Everything else is the same. Furthermore, there is no limitation for one or more foreigners to be partners in a national company. In general, the process of registering a company, once the corresponding paperwork has been completed, is relatively fast and agile. The paperwork
Under the optional regime, tax is equal to 31% of taxable income, which is determined deducting the affected income (gross income minus exempt income), deductible costs and expenses, which cannot be more than 97% of the affected income, except those taxpayers who have losses during two consecutive periods of definitive annual liquidation or have a gross margin less than four percent (4%) of the total of their taxed income. Payments are made quarterly and there is an annual liquidation. Taxpayers under this regime are obligated to pay the Solidarity Tax (ISO in Spanish), which is a recoverable tax under Income Tax in the next fiscal period. ISO is determined applying 1% to gross income or total assets, whichever is greater, and its payment is quarterly. 7.2.2
Income Tax for Employees under Payroll
Income Tax taxes income perceived for labor rendered in a dependant relationship. Employees in a payroll have income exempt up to Q36, 000.00. Income above that amount is subject to a tax that goes from 15 to 31%, the latter rate in the case of taxable income greater than Q295, 000.00. 7.2.3
Value Added Tax
In general, the tax is generated by the sale or exchange of personal property or legal rights constituted over them, rendering of services in the national territory, imports and leasing of personal property or real estate. The rate of this tax is 12%. This tax is determined and paid for monthly, based on its debits and credits. 7.2.4
Sole Real Estate Tax (IUSI in Spanish)
This tax falls on real estate, rustic or rural and urban, including: land, 1 The process can last up to three additional days if it is done in a department other than Guatemala.
10
structures, constructions, facilities adhered to the property and its improvements. Rates on value: The annual tax on real estate is established based on the registered value. Real estate valued at less than Q2, 000.00 is exempt; up to Q20, 000.00 pay 2 per thousand; up to Q70, 000.00, 6 per thousand and above Q70, 000.01, 9 per thousand. Tax is paid quarterly.
8 Employment and social security 8.1
Hiring
The Labor Code (Decree 1441 from Congress of the Republic of Guatemala 1947-2007) is the principal regulatory framework of the relationships between employers and workers. In principle, the law establishes that there must be a contract that regulates this relationship, which fall into one of the following categories: • For and undefined period, when the date of termination is not specified.
in exchange for his work. According to Governmental Agreement 347-2009, the current Minimum Wage beginning January1, 2010 is established as follows: 1. Agricultural Activities: Q56.00 per day for an ordinary work shift and Q7.00 per hour (daily shift). –Minimum wage (Q56.00) by 365 days a year divided by 12 months (=Q 1,703.33) plus Q250.00 bonus DECREE 372001(=Q.1953.33)-. 2. Non Agricultural Activities: Q56.00 per day for an ordinary work shift and Q7.00 per hour (daily shift). –Minimum wage (Q56.00) by 365 days a year divided by 12 months (=Q 1,703.33) plus Q250.00 bonus DECREE 37-2001(=Q.1953.33)-. 3. Export Activity and Production: Q51.75 per day for an ordinary work shift and Q6.46875 per hour (daily shift). 4. Bread maker: Q55.13 per quintal of flour made, according to Governmental Agreement 765-2003.
• For a fixed term, when the date of terminations is specified, or when the occurrence of a certain fact or circumstance can be foreseen for example the conclusion of a construction.
5. Confectioner: 15% in large cake and 12% in small cake, according to the price of the cake, according to Governmental Agreement 23-99, + 8% + 12% + 16% according to GOVERNMENTAL AGREEMENTS NO. 4942001, NO. 459-2002, NO. 765-2003, calculated on initial percentages.
• For a determined product, when it adjusts globally or in an increasing manner the price of the worker’s services from when work his services begin until they conclude.
The incentive bonus of Q250.00 per month must be added to the fixed minimum wages according to Decree 37-2001, for any activity performed.
The contract must be signed by the general director, direct supervisor and the worker. The individual labor contract can be verbal when it refers to: •
Livestock or agricultural labor
•
Domestic services
•
Accidental or temporary workers not exceeding sixty days
• Services for a specific task, when its value does not exceed one hundred quetzals and does not exceed sixty days In the case of verbal hiring, the employer must provide the worker with a certification that indicates the initial date of the working relationship, the stipulated salary, the expiration of each payment period, the number of days or shifts worked or the tasks or work performed. 8.2
Salaries
According to the Labor Code, salary is any benefit that the worker receives
8.3
Terminating
The corresponding legislation establishes the conditions under which any working relationship may be terminated, either by will of one of the parts, by mutual consent or due to causes imputable to either of them, or that it occurs by legal disposition, in which circumstances the rights are obligations emanating from these contracts are suspended. IN summary, the law establishes the cases of justified and unjustified termination as well as voluntary resignation. If an employer wishes to terminate a working relationship and there is no justified cause, he or she must indemnify the worker, with a monthly salary for each year worked and if the period is less than a year, proportionally for the time worked. In the case of justified termination or voluntary resignation, there is no obligation on the employer’s part to pay severance. Notwithstanding the conditions of termination of the labor contract, the employer must pay the worker the following benefits: Unjustified Termination
Justified Termination or Voluntary Resignation
11
Severance of one salary per year
No severance require
Proportional 13 salary (Annual Bonus)
Proportional 13 salary (Annual Bonus)
14th Salary (Bonus)
14th Salary (Bonus)
Proportional Vacation time
Proportional Vacation time
Last salary (proportional)
Last salary (proportional)
The law establishes a period of grace of two months from the start date of the working relationship during which the employer as well as the worker may terminate the working relationship without any responsibility. This means that the employer may, within this period, terminate an employee without having to pay severance, only the additional benefits.
9 Foreigners living in Guatemala 9.1
Types and processes for visas
Depending on the reason or duration of the stay, foreign visitors traveling to Guatemala must request a visitor or resident visa prior to their arrival. Also, they should consult the customs legislation2 regarding samples, promotional material and merchandise for re-export that can be brought into the country as merchandise with no commercial value. In the case of visitors or tourists, foreigners are authorized to remain in the country for a period no greater than 90 days, renewable for the same time only once. To stay on national territory they must have sufficient economic means to live decorously in the country and during their stay they may not be employed in any public or private institution nor may they establish a commercial activity. To complete the process, interested parties must provide the following information:
Nationals from the following countries are exempt from visas: Germany, Andorra, Antigua and Barbuda, Saudi Arabia, Argentina, Australia, Austria, Bahamas, Bahrain, Barbados, Belgium, Belize, Brazil, BruneiDarussalam, Bulgaria, Canada, Chile, China (Republic of Taiwan), Cyprus, South Korea, Costa Rica, Croatia, Denmark, United Arab Emirates, Slovakia, Slovenia, Spain, United States of America, Estonia, Fiji, Finland, France, Greece, Hungary, India, Ireland, Iceland, Marshall Islands, Salomon Islands, Israel, Italy, Japan, Kuwait, Latvia, Liechtenstein, Lithuania, Luxemburg, Macedonia, Madagascar, Malaysia, Malta, Mexico, Monaco, Norway, New Zealand, Panama, Paraguay, Poland, Portugal, Qatar, Holland, United Kingdom, Northern Ireland, Hong Kong, Czech Republic, Dominican Republic, Rumania, Russia, Saint Kitts and Nevis, San Marino, Saint Vincent and the Grenadines, Saint Lucia, Vatican City, Saint Thomas and Prince, Singapore, South Africa, Sweden, Swiss Confederation, Trinidad and Tobago, Turkey, Tuvalu, Ukraine, Uruguay, Vanuatu, and Venezuela. Visa is not required for visitors from the following international organizations: Organization of American States, United Nations and the European Commission. Visas for business are issued to foreigners who, acting on their own behalf or by duly credited representation of for profit foreign entities, travel for business purposes. This visa will be valid for 180 days, renewable for the same period only once. Interested parties must present the following information: 1.
Visa form
2.
Recent photograph
3.
Original passport
4.
Legalized copy of passport
5. Original letter of the company that send the solicitant, describing the business activities that he or she will perform, who will be responsible for expenses incurred in for stay, food and others 6. Original letter from company in Guatemala indicating the purpose of the visit
1. Present valid original passport and legalized photocopy and/or legalized photocopy of the entire passport by the Consulate of the country of origin or the nearest one.
7. Authenticated photocopy of the Legal Persona of the company in Guatemala
2. Present international credit card, bank letter or travelers checks made out in their name..
8. Authenticated photocopy of the Legal Persona of the Legal Representative of the company
3.
9. Authenticated photocopy of the identity card of the Legal Representative, if he or she is Guatemalan, and authenticated photocopy of passport of he or she is a foreigner
Ticket with arrival and departure dates by air, land or sea transportation.
2 Review the Central American Uniform Customs Code (CAUCA in Spanish) and the Regulation of the Central American Uniform Customs Code (RECAUCA in Spanish) – for information regarding temporary imports with re-export in the same state at www.sieca.org.gt
12
10.
Authenticated photocopy of the Commercial Patent
11.
Authenticated photocopy of the Company’s Patent
Residence may be temporary or permanent. Temporary residence refers to foreigners who receive authorization to stay in the country for a period of two years, with the intention of carrying out any activity temporarily. Permanence may be extended for equal periods. Temporary residents may perform remunerated labor or investment with capital. Permanent residence refers to foreigners who, prior compliance with legal requirements, constitute their domicile in Guatemala. The following may request permanent residence: 1. Boarders or Renters 2. Investors 3. Spouse (with a minimum of one year of marriage) and underage or unmarried children 4. Spouse, underage children, parents of nationalized foreigners, when they do not have Guatemalan nationality according to the Political Constitution of the Republic of Guatemala 5. Temporary Resident 6. Temporary Religious Residents
When negotiating the lease it is important to establish rent amount, date when payment is due, duration of the lease and how much deposit is required. If the property is furnished, it is important to inspect that all furniture is in good condition and take pictures of each piece as well. It is also very important to review the restrictions that come with the lease, for example, regarding pets. Also, determine if there are common areas and who is responsible for utilities as well as if the property has its own parking space or if it can be leased separately. When the lease is signed, both parties must exchange identification (photocopy of the personal identification document (DPI in Spanish) or passport). If in the future any modifications are made, both parties must sign their agreement. At the end of the process, each party must keep an original copy of the lease. Notary services for the lease are paid for by the landlord and it is a free decision that either or the parties hire this service. 10.2 Rent terms In general rent terms are for one year with option to extend, deposits vary from one to two months of rent. The lease should be signed with the owner of the property. This contract is drawn up by a lawyer, generally proposed and paid for by the landlord. In most cases real estate firms charge one month rent for services rendered. 10.3 Banking services
10 Lifestyle
The general requirements for opening a bank account are the following: •
Completed and signed form for opening account
10.1 Where to Live
•
Complete photocopy of identity card or passport
10.1.1 Housing
•
Registration of authorized signatures for account management
Guatemala is a country of contrasts and combinations of natural paradise with a colonial past achieving exceptional living conditions. Therefore, its system of houses, apartments, lofts and condos have been subject to investment and renovation to achieve the greatest satisfaction in comfort which can be found in exclusive areas within the city and in any area of the country.
•
Initial deposit or amount of investment
•
Declaration of origin of deposited funds
10.1.2 Guidelines for renting a place to live To rent a place to live it is absolutely necessary to contact and speak to the owner and verify that he or she in fact owns the property. This can be confirmed when signing the lease.
Cards available for use in automatic tellers are issued when a monetary account is opened at a bank. Most banks offer this service. In addition to cash withdrawals at automatic tellers, some banks allow payment of utilities and phone bills among others. Fund transfers have a limit which can be modified or increased by the user. Another service available after opening a bank account is having online banking services which make payments and transactions easier for users.
13
To manage accounts in US dollars, the process is the same as opening a bank account in quetzals, the only specific changes are: Accounts in Dollars: Certification to confirm residence of all personas related to the account, statement of the origin of funds if they exceed the amount of US$5,000.00. 10.4 Postal Services In Guatemala the postal service is managed by a company called El Correo, which is a dealer of postal services: it processes and distributes shipments, delivers correspondence and packages nationwide. It has a national network through which it distributes daily to all department capitals and consolidation points. El Correo has more than 400 service branch offices throughout the country and 993 distribution routes. There are also internationally renowned postal and courier companies offering services in Guatemala. 10.5 Business Etiquette An appointment must be requested two or three weeks in anticipation and confirmed a few days before. Meetings tend to last from thirty minutes to two hours depending on the issues discussed. Documentation is important during business meetings. It is important to have printed materials, multimedia, brochures, etc. Also a sufficient number of business cards should be carried at all times to avoid running out. Business cards are exchanged after introductions and before the meeting begins so they may be used to remember names and titles. Business hours are form Monday to Friday from 8 am to 5 pm, with a break at noon to eat. The lunch break usually does not last more than one hour, except during business lunches where it lasts more. Some companies also have a reduced shift on Saturdays until 12 noon. Government offices and other official centers tend to have a schedule from 9 am to 5:30 pm. Most banks have a similar schedule to government offices although some branch offices may have extended hours that include Saturdays and even Sundays. Shopping centers are usually open from 10 am to 8 pm. Restaurants, bars, discos and other nighttime entertainment places have a limited schedule and close at 1 am. 10.5.1 Proper attire Clean and neat appearances are always favorable. Gentlemen should wear a suit and tie. Ladies can wear a suit or just a blouse with a formal skirt or slacks.Education 10.5.2 University Education Guatemala has prestigious education institutions, including nine private and one public university. The university student population is the largest
in Central America and the Caribbean, there are more than 176 thousand students enrolled. Offer includes the main humanistic and technical careers (degrees in licenciatura and engineer) meeting the strictest international standards. Most universities also have post graduate (Masters) programs. Students, who begin the University at the licenciatura or engineer level, must obtain equivalency exams from the Ministry of Education for secondary level (high school). For a Masters degree, this equivalency is not required. 10.5.3 Elementary and secondary education institutions Guatemala has many institutions at the elementary and secondary levels offering different approaches and stuffy programs that adapt to foreign school cycles. Most private schools, once the student has been accepted, have no problem accepting students during the school year instead of having him or her wait for the next cycle. However, the foreign student must go through the equivalency process at the Ministry of Education to align his education records. For primary, the Ministry of Education requires approval of six grades. For secondary, education is divided in basic (three years) and diversified (two or three years depending on the specialization). At the diversified level, students may choose between different areas of specialization including a technical career. Private education institutions outside of Guatemala City are scarce. They are only referred to in Quetzaltenango, Escuintla, Chiquimula and Retalhuleu. 10.5.4 Language institutes Guatemala City has many academies that offer different schedules and study programs to learn Spanish in a few months. Other cities such as Antigua Guatemala and Quetzaltenango have also developed a string industry in Spanish academies. Many of these programs are intensive and offer a minimum proficiency of the language in a few weeks. 10.6 Health Guatemala offers quality medical services at accessible cost compared to the average cost in the United States. This has allowed the country to develop into a principal market for medical tourism. There are prestigious health clinics and private hospitals. In particular, the country has become a choice for selective and esthetic surgeries, meeting the strictest international safety standards. 10.7 Nightlife Located in zone 10 of the capital city, Zona Viva is the most concurred entertainment center in the country. The most exclusive Ubicada en la zona 10 de esta capital, se ha constituido la Zona Viva, el centro de
14
diversiones más concurrido en la ciudad. Se encuentran en esta zona los más exclusivos hoteles, clubes nocturnos, cafés, bares, discotecas, restaurantes y boutiques. Ahí se localizan varias galerías de arte, en las que se exhiben y venden obras de artistas de las nuevas corrientes de la plástica guatemalteca. 10.8 De compras en Guatemala Los principales centros comerciales de Guatemala albergan gran cantidad de tiendas para cualquier gusto y presupuesto. Los principales malls y centros comerciales del país se encuentran en la ciudad y municipios aledaños. Los compradores pueden encontrar desde ropa de diseñador, productos de uso común, comida, librerías, supermercados, restaurantes, zapaterías, joyería, cafés, salones de belleza y spas, bancos, etc.
11 Turismo y Recreación 11.1
Principales Destinos Turísticos
Los lugares altamente visitados y con potencial turístico en Guatemala se ubican en Antigua Guatemala en el departamento de Sacatepéquez; Mundo Maya en Petén; la Costa Caribe en Izabal; Atitlán en Sololá; la Costa del Pacífico; y la ciudad de Guatemala. 11.1.1 Antigua Guatemala Es el principal destino turístico después de la ciudad de Guatemala además declarada patrimonio de la humanidad por la UNESCO (1979). Es la ciudad colonial mejor conservada de Hispano América. Las actividades al aire libre en dicho departamento se acoplan a cualquier clase de gusto hasta las más exigentes y es ideal para las personas retiradas. En cuanto a las actividades culturales y de entretenimiento se refiere Antigua es de los mejores lugares para encontrarlas ya que posee hoteles y destinos de alta clase, satisfaciendo las necesidades del 56%² de los visitantes al país que buscan dicha clase actividades. ”Perfil de Turismo Receptor”, INGUAT mayo 2007 11.1.2 Petén, Mundo Maya Petén es considerado otro patrimonio de la humanidad por la UNESCO (1979) actualmente es el segundo destino turístico más visitado ocupando el puesto con Atitlán. Petén es la región más rica en cuanto a recursos naturales se refiere, ya que cuenta con la principal selva virgen de Centroamérica, además de albergar la ciudad Maya de Tikal. Las actividades que se pueden realizar son variadas y diversas que van desde cultura, naturaleza, aventura y deporte.
11.1.3 Costas del Caribe Izabal Playas de arena blanca marea tranquila ideal para la navegación en yates y veleros hacen de Izabal un lugar extraordinario para visitar, además su ubicación es ideal para visitar otros sitios turísticos como las Ruinas de Quiriguá, el parque nacional Tikal (Petén), Cayos de Belice y otras islas caribeñas. En cuanto al acceso al lugar se refiere este cuenta con 3 principales ya sea marítimo, terrestre o aéreo. La infraestructura hotelera es de calidad media ya que solo cuenta con hoteles de 3 estrellas pero esto se compensa con las posibilidades de alquileres de hermosas villas a las orillas del lago, río y mar. 11.2 Atitlán La aventura y el deporte extremo están a la orden del día en este precioso destino turístico con orígenes y tradiciones mayas sin olvidar la majestuosa vista del lago con sus volcanes en el horizonte. 11.2.1 Costa del Pacífico La pesca deportiva es una de las principales actividades que se realizan en las costas del pacifico ya que en está costa se registra un record de pesca de 1,663 peces en 4 días como es de esperarse grandes torneos de pesca se realizan allí este es el caso de ILTTA, Presidencial Challenge, entre otros, cabe mencionar que esta actividad genero en el 2006 más de 50 millones de dólares. 11.2.2 Ciudad de Guatemala El turismo ejecutivo de la ciudad de Guatemala es creciente y numeroso ya que por ser casa matriz de las principales y mayoría de multinacionales de la región de Centroamérica abarca un 21% de sus visitantes. La moderna y cosmopolita ciudad de Guatemala es apta para negocios y eventos de categoría ya que ha sido muchas veces sede de convenciones internacionales de renombre como el Comité Olímpico Internacional 2007, Asamblea del BID 2007 y otras. Dentro de los diversos sitios turísticos en la ciudad encontramos: •
Palacio Nacional de la Cultura
•
Mapa en Relieve de la República de Guatemala
•
Iglesias
En lo que a hoteles se refiere, la Capital de Guatemala cuenta con 69 hoteles los cuales están clasificados por categorías de la siguiente manera:
15
•
Hoteles de 5 Estrellas (3)
•
Hoteles de 4 Estrellas (9)
•
Hoteles de 3 Estrellas (7)
•
Hoteles de 2 Estrellas (4)
•
Hoteles de 1 Estrella (0)
•
Hoteles sin clasificación (46)
El estimado de las tarifas que se ofrecen en los diferentes hoteles de la Ciudad de Guatemala, según el tipo de habitación o estadía en el mismo, se encuentra comprendida entre $50 a $600; y la mayoría de éstos se ubican en las zonas 9 y 10. 11.3 Deportes Existen múltiples actividades de recreación en Guatemala que incluyen clubes deportivos dentro y fuera de la ciudad, estos ofrecen actividades como fútbol, pesca deportiva, equitación, polo, boliche, squash y tenis. El golf es una de las actividades con las cuales se puede disfrutar al máximo con campos catalogados de cinco estrellas donde se han realizado varios torneos internacionales. Además cabe mencionar que la pesca deportiva es otro de porte en auge ya que Guatemala es un país rico en variedad de peces en especial los peces vela que se encuentran en abundancia en la costa pacífica la cual ha sido sede de prestigiosos torneos.
16