Reforms to enhance competitiveness and business environment

By Mayora IP

Guatemala looks to promote investment opportunities and work on reforms to enhance competitiveness and its business environment amid the Covid-19 pandemic. Among such reforms, the Congress of the Republic studies changes to the Free Trade Zone Law that facilitate the development of local companies through international investment, higher salaries and special mechanisms that allow the intensive creation of direct employment.

“If the changes are approved, Guatemala could recover 45 thousand direct jobs that were lost since 2015 and even increase them. In the short term, it is estimated that up to 60 thousand jobs can be generated,” stated the Guatemalan American Chamber of Commerce (Amcham) in a press release.

In January 2019 the public Free Trade Zone of Industry and Commerce Santo Tomas de Castilla (ZOLIC) that operates contiguous to the state-owned port Santo Tomas de Castilla issued a regulation allowing the establishment of ZOLIC’s special public economic development zones outside of ZOLIC’s customs perimeter. 

The ZOLIC law grants businesses operating within the new special public economic development zones a 10-year income tax exemption. Additional exemptions include an exemption from VAT, customs duties, and other charges on imports of goods entering the area, including raw materials, supplies, machinery and, equipment and a VAT exemption on all taxable transactions carried out within the free trade zone. Incentives are available to local and foreign investors engaged on manufacturing and commercial activities as well as on the provision of services.

The legislation reforms aims to include more industries among the Free Trade Zone Law, among them tourism, as tourist operators have claimed for the need of a special customs regime.