The political situation in Guatemala is marked by continuing allegations of corruption and widespread calls for reforms. Consequently, in Guatemala many commercial successes are hard fought. The 2021-2022 Anticorruption Evaluation in Latin America published by Forbes indicates that Guatemala is the second most corrupt country in the region – only Venezuela ranked worse. Despite the January 2020 inauguration of a new president who campaigned on tackling high levels of corruption, we have not seen any evidence to contradict the rationale supporting those rankings. In fact, the situation is deteriorating. According to the 2022 Capacity to Fight Corruption Index, which evaluates and ranks Latin American countries based on how effectively they can combat corruption, Guatemala fell 12% from a year earlier – only Bolivia and Venezuela ranked worse.

Low participation in the formal job sector is an important reason to why Guatemala’s tax revenue is the lowest in the region at 10% of gross domestic product - which ranks 209th out of 220 countries in terms of tax collection.  A low tax base combined with a reluctance to take on sovereign debt have resulted in government expenditures also being low. Guatemala’s governmental expenditures are equivalent to only 12% of gross domestic product compared to a regional average of 18%.

The U.S. government advocates for U.S. companies on the whole and for the use of open, fair, and transparent tenders in government procurement and in accordance with CAFTA-DR obligations allowing open participation by U.S. companies. However, in recent years many U.S. company representatives have expressed a reluctance to take the time and expense to evaluate and bid on Guatemala government tenders on what they view as an unlevel playing field. Specifically, companies do not bother to bid on Guatemalan public procurement tenders (goods, services, or infrastructure) published on the Guatecompras website, seeing Guatemala’s public procurement system as wholly corrupted and designed to favor local companies with “ties” to federal ministry, municipal authority, or congressional players.

Other concerns such as violent crime and weak judicial institutions remain serious challenges. Issues related to the Certificate of Origin and classification of goods had represented an obstacle to access preferential tariffs, but these issues have diminished as we have been working closely with the Guatemalan tax authorities to resolve these challenges.

Additionally, widespread procurement corruption, impunity, labor rights abuses, protection of intellectual property, food insecurity, poor education and infrastructure, and deep socio-economic divisions continue to be challenges for the government.

The People’s Republic of China (PRC) has begun to make significant inroads in Central America with respect to investment – and consequently influence – but Guatemala has not yet seen substantial investment from the PRC, since Guatemala still has no official relations with PRC and instead maintains diplomatic relations with the Republic of China (Taiwan). PRC trade with Central America has increased by 70% in the past five years and has emerged as the second largest trading partner for much of Central America. The Chinese now broadening their engagement beyond exports of simple household electronics and motorbikes and is now aggressively pursuing major infrastructure projects in the region such as energy plants, seaports, and telecommunications.

Guatemala imports from China have doubled during the last ten years.   In 2021, imports totaled US$1.38 billion, according to the Guatemalan Central Bank database. Main Guatemala imports from China in 2021 were electrical and electronic equipment, machinery, boilers, iron and steel, and organic chemicals among others.