The Gateway to Western Hemisphere Markets
Economy
Largest Economy in Central America
Guatemala is the largest economy in Central America, with a GDP of USD 102 billion in 2023, compared to USD 86 billion for Costa Rica and USD 83 billion for Panama. The country boasts stable GDP growth, averaging 3.6% from 2013 to 2022, higher than the Central American average of 1.9%. Consumer price inflation averaged 4.1% from 2013 to 2022, compared to Mexico's 4.5% during the same period.
Guatemala's economy is highly resilient to political changes. Presidential terms last four years with no re-election, and no political party has secured consecutive terms. The economy is primarily driven by the private sector, as evidenced by public expenditure, which was only 14% of GDP in 2022—the lowest rate in the region (Mexico 27%, USA 36%, Costa Rica 20%, Panama 22%, El Salvador 29%).
Guatemala's business-friendly environment is further underscored by the privatization of all critical industries, including electricity generation and distribution, as well as hydrocarbon production, storage, and distribution. This move, coupled with strict laws protecting private companies and both local and foreign investments, ensures a secure and conducive business climate in Guatemala.
Exchange Rate
Stability & Security
Since 1987, the Central Bank of Guatemala has allowed the Quetzal to float freely against foreign currencies. Despite this, the Quetzal has remained stable against the USD, fluctuating between 7 to 8 Quetzales per USD since 2000.
Guatemala offers a resilient, private sector-driven economy with a stable exchange rate and consistent inflation, making it an ideal destination for international companies seeking stability, predictability, and security in their offshore operations and financial returns.
Commercial Balance
Exports & Imports
Guatemala benefits from a Free Trade Agreement (CAFTA) with the USA, which includes all of Central America and the Dominican Republic. The leading destination for Guatemalan exports is the USA, accounting for 32%, El Salvador 12%, and Honduras 9%.
Most exports are food products and textiles, but the economy is evolving to include more complex products, such as automotive components, due to the rise of factories catering to various industries.
This transformation is driven by special economic zones (ZOLIC – ZDEEP), which offer significant tax advantages to companies manufacturing locally and exporting their products.
Free Trade Agreements
Robust Trade & Investment
The Dominican Republic-Central America FTA (CAFTA-DR) is the first free trade agreement between the United States and a group of smaller developing economies: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic. CAFTA-DR promotes more robust trade and investment ties, prosperity, and stability throughout the region and along the U.S. Southern border.
In 2022, U.S. trade with CAFTA-DR totaled an estimated $108.5 billion, with $58.3 billion in exports and $50.2 billion in imports, resulting in a trade surplus of $8.1 billion. U.S. goods exports to CAFTA-DR were $48.3 billion, up 24.3% from 2021 and 62% from 2012. Imports from CAFTA-DR totaled $35.6 billion, up 19.4% from 2021 and 15% from 2012. U.S. exports to CAFTA-DR accounted for 2.3% of total U.S. exports in 2022, with a goods trade surplus of $12.7 billion, up 40.8% from 2021.
U.S. services exports to CAFTA-DR were estimated at $10.0 billion in 2022, an 11.4% increase from 2021 and 45% higher than in 2012. Imports of services from CAFTA-DR were estimated at $14.6 billion, a 23.8% increase from 2021 and 62% higher than in 2012, resulting in a services trade deficit of $4.6 billion in 2022, up 63.6% from 2021. U.S. foreign direct investment (FDI) in CAFTA-DR was $8.5 billion in 2022, a 10.6% increase from 2021.
Special Economic Zones
ZDEEP & ZOLIC
Guatemala offers significant tax advantages through special economic zone authorizations known as ZOLIC (Zona Libre de Industria y Comercio) and ZDEEP (Zonas de Desarrollo Económico Especial Públicas). These zones are designed to attract local and foreign investments by providing a favorable business environment for companies looking to offshore their operations.
ZDEEP: Zonas de Desarrollo Económico Especial Públicas (Public Special Economic Development Zones) is a special economic zone focusing on public infrastructure and development. ZDEEP areas offer similar incentives to ZOLIC but with an added emphasis on public-private partnerships to develop the necessary infrastructure for economic activities. This includes logistical support, transportation networks, and utilities, which are crucial for efficient manufacturing and export processes.
ZOLIC: Zona Libre de Industria y Comercio (Free Trade and Industry Zone) is a designation for areas where businesses can benefit from tax exemptions and other incentives. Companies operating within ZOLIC can enjoy reduced import and export duties, corporate tax breaks, and simplified customs procedures. These benefits make ZOLIC an attractive option for companies looking to reduce operational costs and enhance their competitive edge in international markets.
These special economic zones in Guatemala offer a strategic opportunity for foreign companies. The combination of tax incentives, modern infrastructure, and a skilled labor force makes Guatemala an ideal location for producing and exporting goods to North America, Central America, and South America. By leveraging ZOLIC and ZDEEP, companies can significantly lower their operational costs, streamline their supply chains, and tap into new markets more efficiently.
Geography
Puerto Quetzal Commercial Hub
Puerto Quetzal is the key connection between Asia and Guatemala. APM Terminals, with an annual capacity of 340,000 TEU, is the largest facility between Lázaro Cárdenas (Mexico) and the Panama Canal. Puerto Quetzal is also an ideal connection point with several U.S. ports, including San Diego, Wilmington, Los Angeles, Port Hueneme, Crockett, Concord, Tacoma, and Seattle.
Since the inception of the Central America Free Trade Agreement (CAFTA) in 2004, Puerto Quetzal has become a central hub for commercial activities between the USA and Central America.
Additionally, Puerto Quetzal is connected by road to Tapachula, Chiapas, Mexico, a distance of 270 km. This proximity allows logistics operators to ship containers by train or truck through Mexico into the United States. Another option is to use internal roads (400 km) to transport containers from Puerto Quetzal to Puerto Barrios on the Caribbean coast, accessing U.S. ports in the Atlantic.
Demographics
Young & Growing Workforce
Guatemala has a population of nearly 18 million, predominantly urban, with a median age of 22 years and a density of 169 people per square kilometer. The capital, Guatemala City, is the largest city with an estimated 3.2 million residents. The growing population suggests increasing demand for products and services.
The total workforce is around 7 million as of 2023, supporting Guatemala's near-shoring ambitions.
Finca San Jose and Finca Rosa are in the Department of Escuintla, which has an economically active population of 270,543, with 256,519 employed. This nearby labor force provides quality human capital for manufacturing, with 50% having completed secondary education.