Guatemala - Country Commercial Guide
Distribution & Sales Channels

Discusses distribution network from how products enter to final destination, including reliability of distribution systems, distribution centers, ports, etc.

Last published date: 2020-07-28

Overview

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 entity, legally registered in its country of origin, and intending to do business in Guatemala must:

Register with the Mercantile Registry (Registro Mercantil) Registro Mercantil de Guatemala:

Address:       7a. Avenida 7-51, Zona 4

                      01004 Guatemala

Ph.:               [502] 2317-3434

Fax:               [502] 2334-1754

Contact:       Jose Adolfo Flamenco, Registrador

E-mail:    info@registromercantil.gob.gt

Website:    www.registromercantil.gob.gt

Documents for submission to the Mercantile Registry with Request for Registration:

  • Proof that the entity is legally constituted in accordance with the laws of the country (state) in which it is organized or registered.  Certified copy of the deed of incorporation (charter), the by-laws, and modifications thereto.
  • Proof that the Board of Directors has duly resolved to operate in Guatemala and has authorized the legal procedure to obtain permission to do so.
  • A power of attorney in which the person named is given ample powers to act and to represent the entity in all legal matters.
  • A document in which an amount is assigned as capital, with reference to the entity’s operations in Guatemala, and in which it is expressly stated that the entity will be responsible for its obligations in Guatemala with all its assets, both in Guatemala and abroad.
  • A declaration that the entity 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 entity, prior to concluding operations in Guatemala, will fulfill all legal requirements in connection therewith.

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 specific documentation on how to register foreign companies in Guatemala, please refer to the Mercantile Registry’s website: http://www.registromercantil.gob.gt

Register with the Guatemalan Superintendence of Tax Administration (Superintendencia de Administración Tributaria – SAT) at:

Superintendent: Marco Livio Dias Reyes

Website: www.sat.gob.gt

Telephone: [502] 2329-7070

The documentation for registration with the SAT, as required by the Income Tax Law, is identical to that required for registration with the Mercantile Registry. It is advisable to have the documents prepared in duplicate and to submit one set to the SAT, together with a copy of the authorization to operate in Guatemala issued by the Mercantile Registry.  Registration under the Value Added Tax (Decree 27-92) is also necessary. This registration can also be made at the SAT.

Franchising The country has experienced the introduction of many world known franchises and has begun creating and developing local capital franchises that now have presence in the U.S., Europe, South America, and Asia.  This trend has enhanced the confidence of potential investors or franchisees interested in Guatemala. According to the Guatemalan Franchise Association (AGF), fast food is the most popular subsector with 43% market share; followed by services with 33%, retail 11%, clothing 6%, and “other” 7%.

According to “Federación Iberoamericana de Franquicias” (FIAF), Guatemala is the largest franchise market in Central America, with over 300 franchise brands and 3,500 sales locations, which provide more than 25,000 direct jobs. Guatemala is also the fifth largest Latin American market for franchises - 80% of the franchises operated in Guatemala are of foreign origin, and 20% 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 Free Trade Agreement 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. 

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, Sky Zone, Hooters, IHOP, Pizza Hut, Dominos, Taco Bell, Dairy Queen, Dunkin Donuts, The Vitamin Shoppe, Charley’s Grilled Subs, Tony Roma’s, Papa John’s, Little Caesar’s, Cinnabon, My Yogurt, Sbarro, China Wok, Panda Express, Little Cesar’s, Which Wich, Carl’s Junior, Curves, GNC, Tutor Doctor, Home Care Watch Givers, Sir Speedy, Krispy Kreme and  Starbucks.

Opportunities may be to target the well-off, well-educated elites, which are natural markets for goods and services from the U.S. 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. We have 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. Competition in the industy – specially among food concepts has increased significally. 

Due to COVID-19, franchises are other businesses that faced declines in sales and total or partial closures of their establishments due to the suspension of operations imposed by the government.  According to a survey carried out by Francorp and AGF, 25% of the brands predict that in the future they can close up to 25% of the number of establishments they own.  Regarding recovery expectations, the sector is being a bit optimistic since 40% think that the recovery will take between 4 to 6 months, 24% consider that it will take 6 to 12 months and only 10% consider that it will take them more than a year.

Contact

AGF – Asociación Guatemalteca de Franquicias

Contact:  Fiorella Perini, President  mail: infoguatefranquicias@guatefranquicias.org

Market Entry

The most effective way to enter the Guatemalan market is through one of the U.S. Department of Commerce’s Gold Key Service. This is designed to provide U.S. companies with the advantage of local expertise and to schedule meetings with pre-screened business contacts.

Information

Interested parties may contact Commercial Assistant Karla Salas at karla.salas@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, New Orleans, 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, such as sugar mills.  It is recommended that U.S. exporters maintain close sales contacts in Guatemala to call on existing and potential customers.

Internet penetration in Guatemala is 65%, which means that 9.7 million habitants have access to 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.

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, and there are 20.8 million lines. This is an increase of 400,000 lines in 2019. 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 Partnerships
  • Limited Partnerships
  • Limited Liability Companies
  • Public 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

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.

Foreign Companies 

 Any foreign company that is legally incorporated in its Country of Origin, can conduct business in the Republic of Guatemala.  Foreign companies will still need to open a branch or an agency in the Republic of Guatemala, with the Authorization of the Commerce Register of Guatemala. Locally incorporated corporations can be wholly owned by U.S. individuals or entities. It is thus uncommon for foreign companies to register in Guatemala, instead they tend to establish themselves as wholly owned and managed local corporations. 

To open such branch or agency the Company should have:

1. An Attorney-In-Fact who resides under permanent basis in Guatemala with sufficient faculties to represent the company along with judicial representation powers.  If the Attorney-In-Fact does not have such faculties, by law it will be deemed as vested with the same.

2. Credit that it is dully incorporated in its Country of Origin

3. Certified Copy of its Articles of Incorporation

4. Insurance policy in favor of any third party for an amount equivalent to USD 50,000.00, which should be in force during all the time the branch or agency operates in Guatemala

5. Expressly waive to the jurisdiction of the Courts of its Country of Origin and to any right of Alien Status

6. Expressly commit to fulfill all legal requirements to withdraw from Guatemala

7. Certified copy of the last General Balance and Income Statement

8. Records of all business operations conducted in Guatemala, held according to Guatemalan Laws and Regulations

There is no need to request any authorization from the Government for a Foreign Company to:

1. Be represented in a Court of Law

2. Open Bank Accounts with Guatemalan Banks

3. Sell or purchase with authorized commerce agents in the Republic of Guatemala

4. Place Purchase Orders with authorized commerce agents in the Republic of Guatemala as long as the products’ final destination is abroad

5. Grant loans or credits or to receive promissory notes or trade with such credit documents

6. Purchase any real property, unless such real property is an element of a commercial enterprise or if the foreign company regularly trades with real property

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 refer to: tradegov/guatemala.