Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
The United States and Guatemala enjoy a growing trade relationship, which became even stronger after implementation of the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR). As of January 1, 2015, most U.S. consumer and industrial goods enter CAFTA-DR countries duty free (for goods that meet the country of origin requirements). The United States is Guatemala’s largest trading partner accounting for nearly 40 % of Guatemala’s trade.
In general, the Agreement has been very successful for all parties. Intra-regional trade among Central American countries and the Dominican Republic increased from $6.3 billion in 2010 to more than $10 billion by 2018. U.S. goods exports to Central America and the Dominican Republic have more than doubled since 2004 (prior to the Agreement taking affect for the first signatories). Nevertheless, the Agreement has been unable to solve some of the region’s most serious problems – including physical insecurity and corruption.
U.S. merchandise exports to Guatemala were $6.8 billion in 2019. Leading U.S. exports to Guatemala include mineral fuel, oil, machinery, electric machinery and cereals (corn, wheat and rice). U.S. imports from Guatemala totaled $4.2 billion in 2019, a slight increase from 2018. U.S. imports include edible fruits and nuts; knit apparel; coffee, tea and spices; woven apparel; edible vegetables, roots and tubers.
Guatemalan GDP grew an estimated 4% in 2019, reaching an estimated $85.30 billion. In 2020, due to the Covid-19 pandemic, current estimate is that GDP will contract by 2.5%.
U.S. products and services enjoy strong brand recognition in Guatemala, and U.S. firms have a good reputation in the Guatemalan marketplace. It is estimated that approximately 200 U.S. firms have a presence in the market.
The preliminary data from the Bank of Guatemala (BANGUAT) show that the flow of FDI totaled $998.2 million in 2019 (1.17% of GDP), a 3.1% decline compared to 2018. Industries that attracted most of the FDI flows over the last three years were commerce, manufacturing, electricity, banking and insurance, and telecommunications. The United States invested a total of $284.3 in 2019, and it was expected to grow in 2020, but the pandemic crisis is expected to change that forecast.
A key component to Guatemala’s economy is remittances from migrants, most of whom have settled in the United States. In 2019, remittances increased by 12.9% and were equivalent to 13.8 % of the GDP. However, remittances are projected to decline sharply by about 20% in 2020 due to the economic crisis caused by the Covid-19 pandemic.
The economy is largely informal, with estimates upwards of 70% of employment and 22% of GDP. This is one of the reasons that Guatemala’s tax revenue is the lowest in the region at 10% of gross domestic product and ranks 209th out of 220 countries in terms of revenues. 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%.