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Editorial

Legal 500 Doing Business in Guatemala

Contributed by EY Law Central America

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Introduction
Guatemala is considered the largest economy in Central America, with growth above 3% since 2012, reaching 4.1% in 2015, and 3.2% in 2017. State entities forecast a 3.4% growth.  Although it is Central America’s largest economy, it is the one with the highest inequality, with high poverty rates, and even some of the highest chronic malnutrition and mother-infant mortality rates in the region.

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2017 saw ongoing political turbulence in Guatemala: allegations of illegal campaign financing were made against President Jimmy Morales and his National Convergence Front (FCN) party, and his subsequent attempts to expel the head of the UN-backed anti-corruption commission (CICIG) led to public protests of a size not seen since Morales’ predecessor, Otto Pérez Molina was removed from office in late 2015.

Despite such issues, Fitch Ratings forecasts a 3.8% growth in GDP in 2018, thanks to high US demand and workers’ remittance flows (although there are fears that these will be disrupted should the Trump administration impose restrictions on financial transfers). Nevertheless, the ongoing political instability and a series of corruption scandals affecting Guatemalan businesses has impacted on investment spending, with foreign investors in particular wary of involvement. This, in turn, has led to a reduced workflow for law firms dealing with banking and financial transactions, although local and regional banks have become increasingly active. The introduction of new competition legislation (still pending) could, however, increase Guatemala’s appeal to foreign investors.

The domestic corporate market has also slowed down but cross-border transactions within Central America have continued; more and more Guatemalan companies are expanding into the region and beyond, allowing a number of big-ticket deals to go ahead. The continuing push against corruption has also caused an increase in work strengthening companies’ compliance and anti-corruption policies.

In the dispute resolution arena, the increasingly aggressive approach taken by the Superintendence of Tax Administration (SAT) regarding tax fraud and evasion – pursuing criminal rather than administrative sanctions in more and more cases – has meant an exponential growth in contentious tax work. However, in January 2018, the head of the SAT, Juan Francisco Solórzano, was dismissed from his post – a move perceived by some as performance-related, by others as political; three months later, economist Abel Francisco Cruz was appointed in his place, becoming the first superintendent elected by the SAT’s board of directors rather than the president of the Republic. His appointment has encouraged hopes of a change in policy and Cruz has already shown signs of a more moderate approach.

In addition, disputes over mining and energy projects alleged to have violated International Labour Organization (ILO) Convention 169 (which deals with the rights of indigenous groups) have also led to additional work in the contentious arena, and with a shortfall of new projects in a saturated energy market, law firm energy practices have maintained a certain focus on conflict resolution alongside ongoing regional energy matters. The dispute between human rights and environmental groups and Canadian mining company Tahoe Resources over the Escobal silver mine (the third largest in the world) is a particularly significant case.

After a series of major changes in 2016, the law firm landscape in Guatemala remained largely stable in 2017, with the exception of regional firm Pacheco Coto’s absorption by EY Law Central America (boosting the latter’s presence in Guatemala); and the arrival of global player Dentons as the result of a local Central American tie-up with Muñoz Global (formerly part of Arias & Muñoz), to form Dentons Muñoz (which includes a Guatemalan office). More recently, amid signs of further market consolidation, regional operation Expertis announced its tie-up with Spain’s ECIJA, which also has an office in Santiago de Chile.

International Legal Professionals Set to Gather at NYSBA International Section 2017 Seasonal Meeting in Antigua, Guatemala

New York, June 7, 2017 – The International Section of the New York State Bar Association has released the agenda for its 2017 Annual Seasonal Conference, which will take place from September 12-14 2017, at Casa Santo Domingo in Antigua, Guatemala. The theme for the Conference is Enhancing Compliance and Ethics while Growing Markets: Development, Enforcement and Technology.

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