Foreign direct investment (FDI) in Guatemala

FDI in Figures

According to the UNCTAD's World Investment Report 2023, Guatemala received USD 1.35 billion in FDI inflows in 2022, 60.9% less than one year earlier but still above the pre-pandemic levels. At the end of the same period, the FDI stock into Guatemala reached an estimated USD 22.5 billion, around 24% of the country’s GDP. The main investing countries include the U.S., Mexico, Colombia, and Luxembourg. Some of the activities that have attracted the most FDI flows in recent years have been financial and insurance activities, information and communication, trade, and electricity. Preliminary figures from the Banco de Guatemala show that, in the first nine months of 2023, FDI inflows totaled USD 1.13 billion, with Panama, the U.S., and Mexico as the main investors (USD 348, 228, and 185 million, respectively).

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 five 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. The Guatemalan Constitution acknowledges the right to private property and business engagement. Foreign private entities are generally permitted to establish, acquire, and transfer various business interests, with few exceptions for certain professional services. According to the Foreign Investment Law, foreign investors are entitled to the same property rights as Guatemalan citizens. However, foreign ownership of land directly bordering rivers, oceans, and international boundaries is prohibited under Guatemalan law. Guatemala ranks 122nd among the 132 economies on the Global Innovation Index 2023 and 63rd out of 184 countries on the latest Index of Economic Freedom.

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.