3 challenges to overcome when doing business in Guatemala

With over 17 million people, making it the largest population in Central America, Guatemala is often overlooked when people consider expanding their corporation abroad. But doing business in Guatemala can be a fantastic opportunity for several reasons. 

During the 20th century, the country went through a period of great instability, with dictatorships and even a civil war that raged for decades from 1964 to 1996. But those days are over, and the place is blossoming with new and exciting possibilities.

Its geographic location being right next to Mexico makes it perfect for a hub to meet the demands of the large Mexican market and serve as a bridge to the rest of Central America. It is also close to the USA and South America, another logistical advantage. 

The many trade agreements the country has with its neighbors, such as the Central American Free Trade Agreement (CAFTA), which includes the USA and other Central American nations and distant countries, for example, Taiwan and the European Union, makes opening a Guatemala based business a very internationally connected enterprise. 

The United States embassy website highlights that the two countries have “one of the largest trade relationships in the world, with bilateral investment and trade totaling $1.6 trillion annually”, and today we have many US companies doing business in Guatemala.

From 2010 to 2019, for instance, Guatemala grew 3.5 percent per year on average. Even though the growth of the domestic product (GDP) dropped during the pandemic (as in most countries), it regained stability and increased by 4 percent in 2022. This shows the incredible resilience of the Guatemalan economy. 

Even though the country has boomed over the last decade, it is still home to a vast population of poor people and lacks essential public services such as education. This leads to many people working in the informal sector.

Another issue it faces is natural disasters. The country is situated in a zone with a high amount of seismic activity and has suffered from significant earthquakes in the past. That is a major problem due to the fragility of many of the buildings there, but could be seen as an investment opportunity. 

The abundance of natural resources is also a good prospect. Guatemala is one of the few megadiverse countries in the world, and besides its prosperous nature, it also has a rich culture rooted in the Mayan civilization. 

A free-market economy, the currency in the country is the Quetzal, which is relatively stable to the dollar. The most significant sector is agriculture, with coffee, sugar and banana being the main products. Other strong sectors are manufacturing, services and retail commerce. 

In the last few years, the tourism sector has grown substantially. The COVID-19 outbreak had a critical impact but it is recovering to pre-pandemic levels. In 2018, 1.7 million international tourists visited the country.

Guatemala has free trade with all the other Central American countries as well as the European Union, Chile, Colombia, Mexico and the United States, which is its major business partner. 

The economically active population is around 6.7 million, and the country has a very young demographic. Of all its inhabitants, a little more than 40% are less than 14 years old, and 70% are less than 30 years old.  

It has a U$D 85.99 GDP (2021), of which 85% comes from the private sector. The per capita GDP is $5,026, and these numbers make Guatemala responsible for around 35% of the total GDP of Central America.

Despite all these exciting and new options emerging from the country, there are still some challenges to overcome when opening a company or founding a branch there. We are going to lay down three noteworthy aspects to take into consideration.

Luckily, after that, we will also show you how our team of Public Relations in Guatemala can help you out with them.

Bureaucracy 

This is a common problem in lots of countries, but if you are interested in doing business in Guatemala, it is something you will most likely have to deal with. 

A local notary is required for many licenses before opening a business there. The process can be tricky, with lots of governmental permissions to get, and is only possible to do by hiring a legal representative well-versed in the country’s laws. 

After the company is set, there are also all the procedures to build in the country, which again requires lots of permits. Signing workers’ contracts and registering property are also activities where the job is highly bureaucratic. 

Taxes are also very fragmented, with twenty-four different categories of those per year. Therefore, organizing all the payments and doing tax returns for your Guatemala business is quite demanding. 

Work Culture

The professional habits in Guatemala can be rather different from the USA. The first and more obvious distinction is the language. Many Guatemalans do speak English, but this is still a minority. For this reason, it is vital to have bilingual employees on your team. 

Collectivism is also a key cultural element in work environments in Guatemala, and that differs significantly from the individual approach that dominates most US professional settings. Knowing how to deal with that is essential to making the workers feel comfortable and doing a good job is essential. 

The way people often resolve problems is also more holistic and less attentive to each detail in a particular context. Understanding better ways to engage and communicate with them using that perspective also helps immensely.

Corruption

The country has high levels of corruption widespread at several governmental levels, aggravated by an inefficient justice system. This combo leads to impunity, labor rights abuse, high economic disparity and problems in the infrastructure and essential public services.

Os desafios listados acima podem assustar no começo, mas o nosso time de Public Affairs irá te ajudar a superá-los para aproveitar as diversas oportunidades econômicas. 

Trabalhamos duro, construindo pontes entre empresas e órgãos governamentais para identificar assuntos que interessem a todos, o que leva a um cenário onde a colaboração mútua pode criar soluções e estratégias para vencer os desafios. 

Através de fortes relações que ajudamos a cultivar com instituições locais, é possível construir confiança mútua e fazer negócios na Guatemala pode ser mais acessível e menos estressante.