Foreign direct investment (FDI) in Guatemala

FDI in Figures

According to the UNCTAD 2022 World Investment Report, Guatemala received USD 3.4 billion in FDI inflows in 2021, a significant increase from USD 932 million in 2020, surpassing pre-pandemic levels. In 2021, FDI stock into Guatemala reached an estimated at USD 21.4 billion, also reacording an increase when compared to the previous year. Furthermore, the number of Greenfield Investments in the country increased from 120 in 2020 to 417 in 2021. Still, investment levels in Guatemala are lower as a percentage of GDP (less than 15%) than in Latin American (22%) or emerging economies (33%) (El Periódico). Causes include low investor confidence, institutional bottlenecks and uncertainty, recognised by the Bank of Guatemala as even greater factors in investment decisions than interest rates or workforce cost. Main investing countries include the U.S., Mexico, Columbia and Luxembour. Some of the activities that have attracted the most FDI flows in recent years have been manufacturing, trade and vehicle repair, financial and insurance activities, and water, electricity and sanitation services.

The Guatemalan government promotes foreign investment, and investors technically receive equal treatment to national investors, but a variety of regulatory hurdles can serve as a barrier to investment. Guatemala is bolstered by free trade agreements with the U.S. and the E.U., its strategic location, abundant natural resources, a good business environment, strong performance in logistics and tourism, interest in technological development and aspiration to become a regional hub. There are also eight free economic zones in Guatemala, which offer tax incentives to investors. However, obstacles to FDI include insecurity, lack of a highly skilled population, low quality infrastructure, weak legal institutions, administrative burdens, social and political instability, and severe levels of crime and drug trafficking. Investors were also wary of a decrease in public investment and the political tensions between the Presidency and the International Commission against Impunity in Guatemala (El Periódico).

What to consider if you invest in Guatemala

Strong Points

Guatemala’s strong points to attract investment are:

- Prudent macroeconomic policy framework
- Access to international financial support
- Trade agreement with the U.S. (DR-CAFTA)
- Adequate business environment
- Geographical proximity of the United States and Mexico
- Strong potential of tourism, agricultural, mining, hydroelectric and geothermal sectors

Weak Points

Guatemala’s weaknesses impeding FDI are :

- Social and political instability
- Weak infrastructure
- Vulnerability to external shocks (natural disasters and commodity prices)
- Strong dependence on a low value-added industry and the remittance flows of expatriates
- Low tax revenues
- Rural poverty, inequality, underemployment, informality, ethnic cleavages
- Severe levels of crime and drug trafficking.

Government Measures to Motivate or Restrict FDI

The Guatemalan legal structure promotes investment and includes provisions that recognize and protect private property rights for both national and foreign investors. Additionally, Guatemalan law favours foreign investment under the Foreign Investment Law (Ley de Inversión Extranjera-Decree 9-98). 

Foreign investors technically receive national treatment, but a variety of regulatory hurdles can serve as a barrier to investment. Some professional services may be supplied only by local accredited enterprises. Mining activities face additional restrictions as minerals and petroleum are the property of the state.

There exist eight free economic zones in Guatemala, which offer tax inventives to investors. It is also important to note that Guatemala is part of  the  MIGA: Multilateral Investment Guarantee Agency, a branch of the World Bank in charge of promoting and protecting foreign investment. It has also been ratified by the OPIC: Overseas Private Investment Corporation. Guatemala's membership to these types of organizations shows its determination to create a safe and attractive environment to foreign investors.

Bilateral investment conventions signed by Guatemala

Guatemala has signed bilateral conventions on FDI with 21 countries. To find out more, please visit the investment policy hub website of the UNCTAD.