Legal Market Overview
The most populous country in Central America, and with the largest economy, Guatemala saw steady economic growth in the five years leading up to the Covid-19 pandemic in 2020. However, there continue to be high levels of poverty and inequality in the country, and with 70% of the population working in the unregulated informal economy, a huge number of people were left vulnerable when the pandemic struck. The country also endured the impact of hurricanes Eta and Iota in November 2020, which caused severe floods and landslides, and affected more than 1.5 million people.
Yet, while Guatemala’s GDP contracted by 1.8% in 2020, it is the fastest-recovering nation in Central America and the IMF predicts the economy will grow by 4.5% in 2021. This is -in part- due to the key role agriculture plays in Guatemala’s economy, with the sector accounting for 13.5% of GDP, and also to the government’s swift response to the pandemic, introducing strict lockdown measures and providing financial support, including a stimulus of 1,000 quetzals (around $130) for over two million people.
The government has, however, been criticised for its poor planning of the Covid vaccine rollout: Guatemala, along with Honduras and El Salvador, remains well behind other Latin American countries in terms of vaccination rates. In addition, attempts to cut educational and health spending in the November 2020 budget led to large-scale protests outside the National Palace in Guatemala City, while some protesters broke into and set fire to parts of the Congress building.
Allegations of corruption also continue to swirl around President Alejandro Giammattei, particularly after Guatemala’s Congress – controlled by Giammattei’s Vamos party through a series of alliances – blocked anti-corruption campaigner Gloria Porras from taking her seat in the Constitutional Court (the highest in the nation), after she was re-elected for another term.
This situation was addressed by US Vice President Kamala Harris during a trip to Guatemala in June 2021, in which she announced an anti-corruption drive and tougher enforcement against human trafficking in Central America. The Biden administration has promised $4bn to the countries of the Northern Triangle region (Guatemala, Honduras and El Salvador) to combat the corruption and violence at the root of mass migration from the area to the US.
The combination of an unprecedented pandemic, back-to-back hurricanes and continuing corruption scandals in politics has naturally had an impact on Guatemala’s legal market. On the corporate and financial side, there was a swift decline in foreign investment into the country, meaning fewer large, cross-border M&A and financial transactions. However, several firms did advise multilateral development agencies on providing loans to local banks in order to assist with post-pandemic recovery. More recently, M&A work has also started to pick up again, although deal sizes have remained smaller than they were prior to the shutdown.
Restructurings also made up a large part of firms’ workloads during the pandemic, as many sectors, particularly tourism and hospitality, were hit hard. On the other hand, there was a huge upswing in work in sectors that flourished during the lockdown, including food, pharmaceuticals and e-commerce.
In the employment sphere, firms were active advising on the employment aspects of company reorganisations, as well as assisting with the suspension or termination of employment contracts for companies badly affected by the pandemic, the introduction of remote and flexible working policies, and compliance with the government’s ever-changing Covid regulations.
The crisis also saw new trends emerging in the intellectual property space: firms saw an increase in trade mark infringement matters during lockdown as more and more people turned to online shopping and fraudulent products were sold via social media.
The court system in Guatemala has lagged behind in the use of technology and, with the courts closed from March until the autumn of 2020, many cases are still waiting to be dealt with. This has added to the steady growth of arbitration work seen by firms, as clients have become more comfortable with the process and see its benefits in avoiding the delays inherent in the judicial system.
When litigation picks up again, disputes in Guatemala’s energy and natural resources sectors are likely to remain a strong trend, as constitutional challenges are raised by community leaders against the operating licences of mining and energy projects in the country under ILO Convention 169, which guarantees the rights of indigenous people.
Tax disputes have also been a significant area of activity for Guatemala’s law firms over the last few years, but it is believed that the new head of the Superintendency of Tax Administration (SAR), Marco Livio Díaz Reyes, who took up his post in May 2020, will take a less aggressive approach than previous administrations. There has remained a greater emphasis on tax compliance advice, as well as on transfer pricing.
Turning to the Guatemalan legal market proper, the most significant change has been the merger of local powerhouse QIL+4 Abogados with Bufete Melara & Asociados in Honduras, Batalla Abogados in Costa Rica and Valdés Suárez & Velasco in El Salvador to create new regional firm, Alta, (locally Alta QIL+4 Abogados. Another new addition to the market is Spanish giant ECIJA, which continued its expansion into Latin America through a merger with Guatemalan firm Integrum in November 2020, forming ECIJA Integrum.
Other firms in the market with a regional offering include Arias, BLP, Consortium Legal, Aguilar Castillo Love, Lexincorp, Sfera Legal, EY Law Central America, Central Law, LatamLex | Skinner-Klée & Asociados, Dentons Muñoz, García & Bodán and Mayora & Mayora, S.C. (which has additional offices in Honduras and El Salvador).
Full-service domestic firms Legalsa, Carrillo & Asociados and A. D. Sosa & Soto also remain key players on the legal landscape, as do well-known boutiques Viteri & Viteri and Palacios & Asociados/Sercomi (which specialise in IP) and Valenzuela Herrera & Asociados (which is focused on labour law).