Guatemala Country Report

Infortal Worldwide Geopolitical Risk Summary  

Guatemala is the second most populous state with the second largest economy in Central America, trailing only Mexico. 

Guatemala’s recent history has been muddled by internal security concerns, corruption, and questions about human rights violations. As with much of Latin America and the Caribbean, experts warned of democratic backsliding. That was until the 2023 presidential elections, which saw the unexpected rise of Bernardo Arevalo, who won the popular vote after his campaign against corruption and inequality gained popularity. 

Arevalo’s commitment to rebuilding Guatemala and returning to the good graces of the international community is at the center of his agenda. This shift in Guatemalan politics may usher in new opportunities for global businesses and investors. 

Political Update 

The 2023 presidential elections in Guatemala propelled Bernardo Arevalo and his Movimiento Semilla party into power. Arevalo’s success surprised most, as pre-election polling showed him well down the list of preferred candidates. 

The president’s campaign centered on anti-corruption and restructuring the Guatemalan state to better address historic issues, including the unequal application of the law, and was most popular among youth and indigenous groups.

 After his success in the popular election, the Attorney General’s office moved to disqualify him from the presidential race. Widespread protests and pressure from the international community for the holding of free and fair elections helped Arevalo’s campaign succeed, and he was officially sworn into office in January 2024. 

Movimiento Semilla holds a small minority of seats in the Guatemalan Congress and will likely continue to have difficulty passing reforms that align with Arevalo’s vision for the country. 

President Movimiento’s first few months in office have been highlighted by proactive attempts to realign the country with the international community, particularly the West. This was demonstrated by diplomatic tours in both the US and Europe in early 2024, where Arevalo met with officials and businesses in attempts to reestablish diplomatic relations that were severed in recent years and attract foreign investment.  

Economic Update 

The Guatemalan economy has been one of the most stable in the Central American/Caribbean region. It has experienced relatively high levels of growth and was one of the least impacted economies by COVID-19. Despite this, it remains one of the most impoverished countries in the region, and income inequality remains high. 

Many of the country's economic challenges have been related to an ineffective state and corruption. Guatemala is ripe for growth given its abundant natural resources, large domestic market, seaports accessing the Pacific Ocean and the Gulf of Mexico, and proximity to the United States. 

With the new presidential administration committed to addressing some of the country's significant challenges, new opportunities for growth and investment are on the horizon. 

Additionally, via USAID and other development agencies, the United States has made significant efforts to facilitate economic development to slow migration to the United States.

Key Investment Sectors 

The following industries offer opportunities for business growth and investment: 

Tourism: Guatemala offers some of the world’s most attractive historical, cultural, and ecological destinations. Its geographic variations, including volcanic highlands and tropical rainforests in the lowlands, provide incredible biodiversity attractive to the tourist industry. 

Additionally, both contemporary and ancient, strong cultural heritage and diversity are attractive to cultural and historical tourism. Proximity to the United States makes these attractions accessible, though additional investment in tourist infrastructure will be necessary for the country to harness this sector fully. 

Manufacturing: Manufacturing is one of Guatemala’s largest export industries, accounting for 24% of exports. It is also one of the country’s fastest-growing industries, experiencing a nearly 12% increase in 2022. It has been marketed as a potential partner for US companies seeking to nearshore their operations. 

Agroindustry: Agriculture accounts for nearly 10% of GDP. Climatic variations provide for a diverse array of products, including sugarcane, coffee, bananas, and many other fruits and vegetables. Investment opportunities exist in food processing and other value-adding subindustries. 

Textiles: The textile industry is one of the oldest in Guatemala. The production of indigo and cochineal dyes dates back to colonial times. The textile and apparel industry remains a major export and GDP contributor. 

Services Industry: The services industry accounts for the majority of GDP (over 64%). Services include contact centers, business processing, and information technology, amongst others. Many US companies can look to outsource business services and/or invest in this growing sector. 

Construction and Materials: Several large government infrastructure projects, including improving major ports and highway infrastructure, have been announced or are currently underway. This has been a primary driver of economic activity and has undergone rapid, short-term growth. 

Recommendations for Companies and Investors  

Companies and investors looking to expand or begin business in Guatemala should include the following factors in their due diligence: 

• Guatemala is a significant transit country for transnational migration and drug trafficking between North and South America. The existence of criminal gangs and cartels can pose security issues for personnel and capital. Racketeering and other acts of corruption are common and are magnified by the existence of organized criminal networks. Companies should take great care in understanding who they are doing business with to avoid promulgating these issues. This requires conducting deep-level on any business partners and companies you plan to do business with. 
• Guatemala has a history of political instability and high-level corruption. Companies should be aware of corruption in the public sector, especially in government procurement. 
• Guatemala is prone to natural disasters, including earthquakes, volcanic eruptions, and hurricanes. Such disasters can be devastating to local infrastructure. Businesses should have well-developed emergency response and other contingency plans in the case of natural disasters. 
• Social inequalities and human rights issues are prevalent. Companies should be aware of the local context in which their business operates and mitigate their involvement in furthering such disparities. They should also work with local partners and leaders to address issues in the communities where they operate. 

Deep due diligence is essential to ensure compliance with US laws and regulations regarding doing business in and around Guatemala. If your firm operates in the region, avoiding heightened Foreign Corrupt Practices Act risks is critical.

If you are entering the region for the first time, you should also conduct a geopolitical risk assessment to ensure that there are no emerging political risk considerations that could impact your firm’s operations.

Want To Know More?

For a deeper review of political, economic, due diligence and security risks for Guatemala, please contact us.