Legal Market Overview
Guatemala continued to see political instability in 2018 and 2019. The current president, Jimmy Morales, faces accusations of illegal campaign financing and fraud, and incited protests after attempting to expel the UN-backed anti-corruption body Comisión Internacional contra la Impunidad en Guatemala (CICIG) from the country – a decision which was eventually overruled by the Constitutional Court.
CICIG’s mandate in Guatemala comes to an end in 2019 (and the UN has withdrawn its members from the country after the current government’s refusal to guarantee their safety), so there are concerns about the anti-corruption agenda in the future. This will depend a great deal on the outcome of the upcoming presidential, mayoral and judicial elections, which are due to take place in June 2019.
Overall, however, the Guatemalan economy has remained stable, with a 3% growth in GDP in 2019 forecast by the Economic Commission for Latin America and the Caribbean (ECLAC).
Although election-year uncertainty has led to a slowing down of foreign investment and corporate transactions in the country, firms’ corporate and banking practices have been kept busy, as Guatemalan companies are continuing to expand into the Central American and Caribbean markets, and local banks are becoming increasing competitive.
A more measured approach taken by the tax administration, Superintendencia de Administración Tributaria (SAT), to cases of possible tax evasion and fraud has meant that tax litigation has been less of a focus for firms. However, increased scrutiny of companies’ taxation and corporate arrangements, following a number of corruption scandals in Guatemalan businesses, has meant more work putting clients’ affairs in order and ensuring they are compliant with local regulations.
In the energy sector, activity has slowed down as several mining and hydroelectric projects are tied up in constitutional litigation following challenges to their operations by environmental and local indigenous groups – which has led to an increase in dispute resolution work for firms. In fact, Guatemala has seen an increase in litigation – civil, commercial and administrative – across almost all sectors, and firms are also growing their mediation and arbitration practices, something which is relatively new in the region.
The legal market has also seen several new entrants: immigration services firm Fragomen LLP opened a Guatemalan office in February 2019, and insurance specialist Kennedys has established a presence in the country through an association with Guatemalan firm Palomo Abogados. In addition, a new local firm, Clarity Law, was formed in March 2019 by lawyers including former Arias partner José Augusto Toledo.