Guatemalan businesspeople are accustomed to doing business with the United States and key contacts in the large corporations are fluent in English. Most Guatemalan importers have traveled extensively to the United States and/or have done business with U.S. firms. Nevertheless, to maximize the probability of success in the Guatemalan market, U.S. exporters should be aware that when the time comes to formalize a business relationship, for example, through a contract or writing materials, it is most recommended that such formalities are conducted in Spanish.
Almost half of all firms selling into the Guatemalan market do so by means of a Guatemalan agent or distributor. The rest sell directly to Guatemalan buyers. In general, the more pre-sales marketing and after-sales support and service that a product requires, the more important it is to have a local agent and distributor.
Most business conducted in Guatemala is based on personal relationships. Guatemalan business executives and government officials place great importance on personal contacts with suppliers. U.S. suppliers should be prepared to travel to Guatemala often and have a local representative or distributor. U.S. businesspersons are often surprised by the accessibility of key decision makers and the openness and frankness of local buyers.
Sales to government agencies and corporations are best achieved through local agents, distributors and other types of representatives; in some cases, this is a requirement. It is not very practical to target government sales if a firm does not have contacts in Guatemala who are aware of opportunities and able to assist in obtaining the specifications and meeting deadlines for submission.
Using an Agent or Distributor
One of the most important decisions a U.S. company will make in Guatemala will be the selection of a qualified and competent sales representative and/or distributor. A distributor with well-positioned sales outlets in important commercial locations will greatly enhance chances of capturing a major share of the end-user market.
Firms with valuable intellectual property should take the legal steps necessary to ensure that it is protected. Firms should never delegate the job of registering intellectual property, such as trademarks and trade names, to a local agent, distributor or business partner. This should be done directly by the U.S. firm, with the assistance of a Guatemalan attorney. Careful attention to Intellectual Property Rights (IPR) issues initially will prevent problems later.
Selection of the appropriate agent or distributor requires time and effort. The same high standards used when selecting a representative in the United States should, to the greatest extent possible, be used in Guatemala. English language capability, while important, should not be over-emphasized as a decision factor when selecting an agent or distributor. Reputation, product and industry knowledge, track record, and commitment should be weighed heavily.
Exclusivity will be requested by most potential agents and distributors, not only for Guatemala, but also in some cases, for part or all Central America. U.S. exporters should scrutinize the request closely. The trend among U.S. and other foreign firms seeking representation in Guatemala is toward non-exclusivity and well-defined, renewable periods for representation. Guatemala can be a great place from which to enter the larger Central American market, but not all potential agents and distributors will be able to do this properly.
When deciding with whom to work, U.S. firms should take the time to get to know the people they are considering, both in business and social settings.
While finalizing an agency or distribution arrangement, U.S. exporters should make sure the agent or distributor understands clearly the terms of the relationship. The written agreement is important, however, both parties must understand the terms completely to avoid future problems. Exclusivity is understood unless the agreement specifically states otherwise.
Formal agency or distribution agreements should be reviewed by a Guatemalan attorney hired by the U.S. exporter. The attorney should be independent of the Guatemalan party with which the agreement is being established. The Guatemalan legal system can be slow and the law, under certain conditions, offers local agents and distributors a great deal of protection.
Establishing an Office
A foreign company, legally registered in its country of origin, and intending to do business in Guatemala must register with the Mercantile Registry (Registro Mercantil de Guatemala):
Address: 7a. Avenida 7-61, Zona 4
01004 Guatemala
Ph.: (502) 2317-3434
Contact: Diego Jose Montenegro Lopez, Registrador
E-mail: info@registromercantil.gob.gt
Steps to register a foreign company with the Mercantile Registry:
- Fill out a registration form for foreign companies at https://www.registromercantil.gob.gt/webrm/
- Pay the registration fees at the bank located at the Mercantile Registry.
- Submit the following documents to the Mercantile Registry:
Foreign company registration formPower of attorney registration form Proof that the entity is legally constituted in accordance with the laws of the country (state) in which it is organized or registered. Proof should include a certified copy of the deed of incorporation (charter), the by-laws, and modifications thereto.Proof that the Board of Directors has duly resolved to establish a branch in Guatemala and has assigned capital for its operation in the country.A power of attorney in which the person named is given ample powers to act and to represent the company in all legal matters.Proof that the capital assigned for the operations of the branch in Guatemala was deposited in a local bank. A declaration that the foreign company will respond to its obligations in Guatemala with all its assets, both in Guatemala and abroad.A declaration that the company recognizes the jurisdiction of the courts and laws of Guatemala, with respect to its activities and operations in the country, and that neither the entity nor its representatives and employees will seek special rights as foreigners.A declaration that the company, prior to concluding operations in Guatemala, will fulfill all legal requirements in connection therewith.Proof of payment for registration
Certified copies of its latest financial statements (balance sheet and income account). The documents must be certified by an authorized official in the country (state) of origin and must be authenticated by an appropriate Guatemalan Consular Official. For additional documentary and process requirements to register foreign companies in Guatemala, refer to the Mercantile Registry’s website.
Beside registering with the Mercantile Registry, a foreign company wishing to operate a Guatemala-based branch must also register with the Guatemalan tax administration authority (Superintendencia de Administracion Tributaria- SAT), the social security institute (Instituto Guatemalteco de Seguridad Social –IGSS) and the labor ministry (Ministerio de Trabajo y Previsión Social). Companies who want to sell to the Guatemalan government must also register with the General Registry for State Acquisitions. Please visit the State Department’s Investment Climate Statements website for pertinent information related to establishing and operating an office and to hiring employees.
Franchising
For the last 10 years Guatemala has experienced the introduction of many well-known franchises and has begun creating and developing local capital franchises that now have presence in the United States, Europe, South America, and Asia. This trend has increased the confidence of potential investors or franchisors interested in Guatemala. It is estimated that 52% of companies that carry out their operations through franchises remain in the Guatemalan market for more than 10 years.
According to local resources, in Guatemala, it is estimated that 31.6% of franchises belong to fast food restaurants, 31.6% to “other services”, such as gyms, beauty salons, clinics focused on personal care/health, and 10.5% to real estate services.
In the retail sector, consumers increasingly prefer quality over quantity. The buyer demands a higher value for their money and the way to achieve this is by offering something something more than the product. The consumer is looking for a good shopping experience that is efficient and offers proper customer service. In addition, time is essential and the current pace of life does not allow the consumer to spend too much time in a store, supermarket or website, so it takes organization, efficiency, and ease at the time of purchase.
According to “Federación Iberoamericana de Franquicias” (FIAF), Guatemala is the largest franchise market in Central America, with over 300 franchise brands and 3,500 shops, which provide more than 25,000 direct jobs (an average of 420 sources of formal work per franchise) Guatemala is also the fifth largest Latin American market for franchises - 75% of the franchises operated in Guatemala are of foreign origin, and 25% of local origin. FIAF estimates that 45% of the foreign franchises are from the United States, and the rest from Mexico, Spain, Brazil, Colombia, and others.
Local franchise companies operate mainly in the fields of fast food restaurants, bakeries, ice cream shops, automobile services and supplies, gas stations, advertising signs, hotels, beauty clinics, gifts, and toy shops.
There is a high concentration of franchise retailers in Guatemala City as it is the most populated city in the country with approximately 4 million people. Other cities like Quetzaltenango, Antigua, Huehuetenango, Cobán, and Escuintla have also shown growth in franchising.
The CAFTA-DR provides full market access to franchising. Trademark provisions protect the franchisor’s name, and tariff liberalization allows lower-cost exports of key equipment required to supply the franchisee. In Guatemala there is no franchise law as in other countries. The franchise model is a commercial contract named within the commercial code in Guatemala, but not specifically regulated. Decree Number 57-2,000 of Congress is in force, which includes the Industrial Property Law as a legal instrument that partially regulates franchise contracts. This document only considers the regulation on trademarks including registration, rights, limitations, license of use, etc. but it does not include the essential elements of the contract, such as the territory in which the contract will be developed, confidentiality, the duration of the contract, etc. For these reasons, it is recommended to obtain technical and legal advice to start, continue or terminate a business under the franchise regime.
The Competition Law (Initiative No. 5074) is pending Congressional approval, and it is expected that adjustments will be made so that it does not harm the franchise market in Guatemala. One of the concerns of the proposed law is that if franchisors are not able to establish exclusive territories, it would discourage the development and entry of new franchisors. This proposed law is expected to be approved by the end of 2023.
A current trend not only in Guatemala, but in the region, is that a group or local company owns one or more franchises and continues to include others as they grow. This is the case with many U.S. franchises in Guatemala, who are owned by one Guatemalan group or even more frequently, owned by Salvadorian or Honduran groups based in their respective countries.
Successful U.S. franchises operating in Guatemala:
McDonalds, Wendy’s, Burger King, Subway, The Orange Theory, Applebee’s, PF Chang’s, Kentucky Fried Chicken, Chili’s, Friday’s, Hooters, Denny’s, Pizza Hut, Dominos, Taco Bell, Dunkin Donuts, The Vitamin Shoppe, Tony Roma’s, Papa John’s, Little Caesar’s, Cinnabon, China Wok, Panda Express, Little Cesars, Carl’s Junior, Curves, GNC, Tutor Doctor, Home Care Watch Givers, Sir Speedy, Krispy Kreme and Starbucks.
Opportunities for U.S. franchises in this market are promising as Guatemalans welcome new ideas and are open to new franchising possibilities, specifically for recognized brands. Because of the proximity with the United States, many Guatemalans have experienced different U.S. concepts and want to bring them to Guatemala. It is highly suggested that franchises examine the market and determine if the franchise needs any adaptation to the local culture and customs
The success of operating a franchise requires time, dedication, innovation, a good business relationship with the franchisor and many other factors. Such is the case of the McDonald’s franchise in Guatemala, which began in 1974 and in February 2022 celebrated the opening of restaurant No. 100. This franchise has created nearly 6,000 jobs across the country and this new restaurant alone generated 100 new jobs.The highly educated segment of the population is a better target to market goods and services from the United States. These groups may also become business partners and valuable contacts within the country and region.
Guatemalan investors are very selective when showing interest in brands that are well-known and successful. CS Guatemala has found that there is little interest in developing unknown brands, or concepts, because they would have to struggle to compete and stay afloat with the existing strong brands. Also, competition in the industy – especially among food concepts has increased significantly.
With regard to COVID-19 pandemic and its effect on the Guatemalan commercial environment since March 2020, franchises and other businesses faced sales declines and total or partial closures of their establishments due to the suspension of operations imposed by the government. However, according to a survey carried out by Francorp and the Guatemalan Franchise Association (AGF) among their members, they consider having a growth in sales above 25% in 2022 and 36.8% responded that their sales recovered in the last quarter of 2021.
Contact
Interested parties may contact Commercial Assistant Vivian Gonzalez at vivian.gonzalez@trade.gov
Direct Marketing
Approximately one half of all imports from the United States are the result of direct sales. Many of these result from Guatemalan business people contacting potential suppliers located in traditional U.S. supply centers, such as Miami, Los Angeles and Houston, among other cities, to satisfy a specific product or service need. Other sales result from marketing through the Internet, which is now very popular among medium and large businesses. Direct marketing is usually more effective in cases where the product is well-known or the group of local buyers is relatively small and easily identifiable. It is recommended that U.S. exporters maintain close sales contacts in Guatemala to call on existing and potential customers.
Direct marketing in Guatemala is based on the active participation of costumers, so if the consumer is involved, success is assured. Any U.S. company interested in direct marketing in Guatemala, will find numerous options among professional agencies establised in the country.
Digital marketing had slowly evolved in Guatemala, however, due to the COVID 19 pandemic, it accelerated by the new rules of the global market. The Ministry of Economy (MINECO) in alliance with the Organization of American States (OAS) launched a digitalization plan to facilitate e-commerce to 15,000 SME’s. Internet penetration in Guatemala is 65%, which means that 11.5 million habitants have access to internet and online retail. Guatemalans are now used to buying online not only in Guatemala, but more so from the U.S. which, because of the proximity, is relatively easy. Many orders are placed via the Internet and most of the merchandise ordered, except for heavy machinery, is processed via electronic orders. Guatemalan business people access websites and search for specialized merchandise.
Daily internet access in Guatemala has grown during the last decade. With the spread of cell phones, the internet has become a more important news outlet than radio and newspapers, particularly among younger citizens and in the main cities of the country, such as Guatemala City, Antigua Guatemala and Quetzaltenango.
The most used sites in Guatemala are: Facebook, YouTube, Twitter, LinkedIn, Instagram, Amazon, and Google. Facebook ranges from 25 to 40% of overall internet usage. That figure is much higher among the Guatemalan youth, approximately 60%.
There are two companies in Guatemala that offer mobile phone service CLARO and TIGO; as of early 2023 both companies reported a total of 23.2 million lines.
Joint Ventures/Licensing
Commercial companies in Guatemala are governed by the Commerce Code (Congressional Decree No. 2-70) of January 28, 1970.
Article 10 of this Code is specific with respect to the type of corporative organization which is acknowledged under the category of “Commercial Company”, therefore the only collectively considered Merchant as per the Guatemalan Law (Art. 3 of the Commerce Code):
Corporations (Sociedad Anónima) The most commonly used business vehicle in Guatemala:
General PartnershipsLimited PartnershipsLimited Liability CompaniesPublic Partnership Companies
Article 12 provides that banks, insurance companies, re-insurance companies, bonding companies, re-bonding companies, financial firms, general warehouses, stock markets, mutual societies, and other similar organizations will be controlled with respect to their form of corporate organization and operation by the provisions of the Commerce Code, specifically to the extent not governed by special Laws and Regulations.
The use of a trade name that includes first names and two-family names of the participating persons shall make those persons legally responsible, just as if they were members of a general partnership, assuming they consented to the use of their name.
Participation Agreements
Participation Agreements (“Negocios en Participación”) are regulated by Articles 861 to 865 of the Commerce Code as contracts, not as companies or collective entities.
In a participation agreement, the participants enter into a contract (“Contrato de Participación”), by which the person called the “active partner” obligates himself to share with one or more persons called the “participants”, who contribute goods or services, the profits or losses resulting from one or several operations of their enterprise or of the complete turnover thereof.
The main element of a Participation Agreement is the Contribution of the Participants.
The active partner operates in his own name and assuming the risk of the joint operation. There is no legal relationship between third parties and the participants.
Participation Agreements are typical contractual forms according to Guatemalan Law and constitute a special case of Tax Payer, obliged to comply with all formal and material Tax Obligations as per Guatemalan Tax Legislation, holding the Active Partner responsible for Tax Liabilities of the Joint Operation.
Joint Ventures/Licensing
Joint Ventures (distinct from Participation Agreements) are not regulated by Guatemalan Law.
These are flexible contractual forms based expressly on Contracting Freedom Rights acknowledged by Guatemalan Law (Art. 681 of Commerce Code).
Joint Ventures are Associative Business models, which do not constitute a Partnership or a Participation Agreement or any other Merchants Collectively Organized, but are customized for the specific business collaboration tasks to be performed by the parties.
Joint Ventures are not deemed as special cases of Tax Payers, therefore each of the contractual parties is responsible for the compliance of its respective formal and material Tax Obligations.
Express Delivery
All major shipping companies (UPS, Fedex and DHL) as well as local companies offer express shipping between Guatemala and the U.S. with door to door service of 2-3 business days. The service is feasible for documents, samples or personal effects.
Due Diligence
Performing due diligence in Guatemala can be challenging and time-consuming. There are very few sources of independently verifiable information about companies and individuals. Guatemalan companies are not publicly-listed and they rarely publish information regarding officers, sales or financials. Most companies are sole proprietorships and partnerships, and business is generally conducted based on personal reputation and contacts.
Companies should request bank and trade references from potential agents and customers. Companies should also consult their own U.S. banks for information on Guatemalan banks, most of which have correspondent banking relationships with banks in Florida.
The U.S. Commercial Service in Guatemala offers an International Company Profile report to U.S. companies, in which in depth information about the local Guatemalan company may be obtained, depending on the source availability. For more information, please contact Commercial Service in Guatemala.