A statute or special law regulating foreign investment in Guatemala is currently being examined.

At the constitutional level, the only relevant provision in relation to foreign investment is contained in paragraph n of Article 119, that establishes that it is the obligation of the State of Guatemala "to create the conditions conducive to the promotion of local and foreign capital investment."

Most laws, both general laws as well as what are termed "sectoral laws" which are related to or regulate the participation of foreign capital in activities related to investment.

For example, the Civil Code, the Commercial Code, Labor Code, Migration and Immigration Law, Mining Law, Petroleum Law, Forestry Law, Geothermy Law, and so forth.

At the administrative level there are also regulations or agreements of relevance to foreign investment but they may never challenge or regulate contrary to the provisions of ordinary laws. For example, the Regulations for the Issue of Work Permits to Foreign Workers.

It is not defined.

In general, there are no specific records of foreign investment. However, the Mercantile Register of the Republic contains records of foreign companies that have requested authorization to operate in the country. These records could therefore be used as an indirect foreign investment control. In addition, when an "essentially" U.S. investment requires guarantees or OPIC investment insurance, a record of it is kept in the Ministry of Economy, since that ministry is responsible for the prior approval of the investment project.

Currently, a Foreign Investment Law defining the national and foreign investor is being discussed. However, Article 8 of the Commercial Code allows foreigners to do business, also permitted by Article 50 of the Migration and Immigration Law. This spirit of commercial freedom is expected to live on in the Law being studied.

Since there is no foreign investment regime, this question does not apply. For instance, in the case of investments requiring guarantees or OPIC insurance, a national of Guatemala could not resort to that special regime since it is applicable to "essentially" U.S. investments.

In general investments can be made by companies with local and foreign capital. In addition, the general rule provided in the Commercial Code (Article 18) is that both foreigners and foreign companies may participate without limitation in the formation or incorporation of local companies. Nevertheless, there are certain sectoral laws that require minimum percentages of local capital. These cases constitute the exception to the general rule and will be mentioned below.

No.

The Constitution establishes preference for Guatemalan workers over foreigners. Save special government authorization, at least 90% of a company’s workers must be Guatemalans and they must receive at least 85% of the payroll of the company, with the exception of up to two management posts. (Those posts are not included in the preceding percentages.)

Article 118 of the Constitution establishes that the economic and social regime is based on principles of social justice. This Article also establishes the subsidiary role of the State in the economic activities to be undertaken in the country, thus delegating the principal role to the private sector.

According to the Constitution of Guatemala, the responsibilities of the State include those contained in Article 119 of the Constitution. Mention must be made of the following: to prevent excessive practices that lead to the concentration of goods and production to the detriment of the community; to protect capital formation, savings and investment; and to promote the coordinated and efficient development of domestic and foreign trade, promoting markets for local products.

There is no constitutional provision specifically guaranteeing economic equality. However, the Constitution enshrines such rights as equality under the law, free trade and industry, and the prohibition of monopolies.

In the few cases where there is competition between public and private enterprises (for example, power generation), equal conditions may be said to exist. Moreover, based on the special regulations to which public enterprises are subject, at times private enterprise has been considered to hold certain advantages (for example, budgetary independence and flexibility in procurement and contracting).

Since there is no special foreign investment regime, there is therefore no express list of foreign investment activities.

In Guatemala, State monopoly exists in the following sectors: telecommunications, social security and welfare, rail transport to a certain degree, electricity distribution, and customs and port services.

With respect to State monopoly in the telecommunications sector, the Telecommunications Company of
Guatemala (GUATEL) may grant concessions to private companies which provide cellular and long distance telephone services and that long distance service is also provided by GUATEL.

The following prohibitions, restrictions or limitations exist:

Professional services: Article 213 of the Commercial Code prohibits the operation of foreign companies that provide professional services for which a legally recognized university degree or certificate is required.

State monopolies: railways, ports, airports, telecommunications.

Forestry: Article 126 of the Constitution establishes that the development of forestry resources shall be carried out exclusively by Guatemalan individuals or companies. Companies must include 70% Guatemalan shareholders.

Cable transmission via satellite: 70% local capital in Guatemalan companies involved in this activity.

Hydrocarbons: at least 5% local capital in the companies involved in this activity.

Radio communications: 70% local capital.

National Air Transport: 51% local capital

Ground Transport: 60% local capital

Fishing: type "A" fishing licenses, more than 50% local capital; type "B" fishing licenses, 25% to 50% local capital; and type "C" licenses, without restrictions for foreigners.

Insurance: agencies or branches of foreign insurance companies are prohibited from operating in Guatemala. Nevertheless, they may form subsidiaries (Guatemalan companies) with 100% foreign capital.

The preceding prohibitions and restrictions are not based on the principle of international reciprocity, but rather they have been unilaterally established for purposes of public order.

In general, Guatemalan laws applicable to foreign investments do not include performance requirements on all foreign investment. This may perhaps be because there is no specific law or statute for foreign investment. One exception may be found in Article 30 of the Geothermy Law (Decree Law 126-85) that establishes that geothermal contractors must give preference to the procurement of locally manufactured goods and products.

Yes, in general terms. Nevertheless, there is no statute or special law on privatization regulating this area. No limitation is expected in the future.

Generally, local or national treatment is accorded. The MFN clause comes from multilateral free trade agreements, that is, WTO, which after the Uruguay Round was extended to topics related to investment.

There are some exceptions to national treatment, such as the constitutional prohibition on acquiring real property in border areas (Article 123 of the Constitution) and the prohibition on foreigners acquiring real estate by supplementary award of land titles. (Article 29 of the Migration and Immigration Law).

According to Article 40 of the Constitution, grounds for expropriation (duly proved) are:

a) Common utility

b) Social benefit

c) Public purpose

An ordinary law (Decree 529 of Congress, and amendments thereto) regulates expropriation.

It is based on expert appraisal, on the basis of market value. Compensation must be made in advance, in legal tender unless the party concerned agrees to another form of compensation.

No, except in case of war, public disaster or serious disturbance of the peace.

Yes. The Constitution makes no distinction in Article 39 (Right to Private Property).

It also guarantees intellectual and industrial property (Article 42 of the Constitution).

All aspects related to patents, industrial models and designs are governed by Decree Law 153-85.

Are governed by the Central American Convention for the Protection of Industrial Property. Guatemala is also a party to the 1929 Pan-American Convention of Washington, but is not yet a party to the Paris Convention.

Is governed by Decree Law 1037.

The Berne Convention for the Protection of Literary and Artistic Works, approved and in process of ratification.

At present, a new draft copyright bill is being discussed with a view to improving protection. In November 1994, the government signed a new Central American Convention for the Protection of Industrial Property (ratification is pending). Guatemala is also a member of GATT.

At present there are no regulations or restrictions on the entry of investments.

Legally, there are no restrictions on remittances of capital and profits, payments for services, payment of interest and royalties. One restriction of a practical nature may be the unavailability of foreign exchange.

There are basically two types of foreign exchange markets, namely the bank and the "state" markets. Private banks and authorized money exchanges participate in the bank market to which foreign investors have full access. The "state" market is maintained by the Bank of Guatemala (the Central Bank) for state entities exclusively, and consequently foreign investors have no access to it. In both markets, the exchange rate is governed by supply and demand, and the Bank of Guatemala may intervene in the exchange rate in emergencies.

There are no special tax regulations for foreign investment.

There are no special tax regulations for foreign investment.

Guatemala has not signed treaties to avoid double taxation with any country in the Americas.

After 1992, the majority of fiscal privileges in Guatemala were abolished by legislative decree, and only a few laws providing special fiscal incentives remain in force. Among these few laws of relevance to foreign investment are: the Free Zone Law (Decree 65-89 of Congress); Law on Export and In-bond Assembly Activity (Decree 29-89 of Congress); National Tourism Development Law (Decree 25-74 of Congress); and Law on New and Renewable Sources of Energy (Decree Law 20-86).

Nationals and foreigners enjoy the same treatment with respect to incentives, both in respect of taxation, as well as access to credit, industrial parks, and personnel training. With respect to insurance, the foreign investor may resort to the benefits of OPIC and MIGA.

Foreign investors have access to the same recourse procedures as national investors. Nevertheless, there is the so-called bailment (arraigo) exception under which the foreigner must guarantee legal penalties, costs, damages and loss in case his petition were dismissed. Generally there are no special procedures for foreign investors.

Guatemala is not yet a member of ICSID although a motion (Decree No. 50-96) is currently before Congress to approve the corresponding convention prior to its ratification.

Guatemala must resort to other international arbitration mechanisms with respect to conflicts deriving from essentially US investments with OPIC investment guarantees, and very shortly with respect to all MIGA investment guarantees, since MIGA is soon to be ratified.

Guatemala has not signed any bilateral investment treaties with countries in the Americas.

In Guatemala, unlike other countries, there is no provision in the Constitution that clearly establishes the juridical hierarchy of international treaties vis-à-vis purely domestic laws. The only exception is in the case of treaties or conventions related to human rights, pursuant to Article 46 of the Constitution which states: "It is established as a general principle that human rights treaties and conventions accepted and ratified by Guatemala take precedence over domestic law."

From the above, it may be inferred that human rights treaties are even higher in status than the Constitution itself. Nevertheless, in respect of other types of treaties or conventions, such as investment treaties, there is no rule establishing their superiority over domestic laws.

Nonetheless, in Guatemala it is a generally accepted principle that treaties take precedence over domestic laws. In addition, this point is clarified in some treaties, for example, the Inter-American Convention on General Rules of Private International Law, in which it is established that the rules of this convention must be applied before domestic rules.

Once a treaty has been duly incorporated into Guatemala’s juridical legislation, in compliance with constitutional procedure, it has direct effect.

The constitutional procedure referred to includes three phases: signature by the executive body, approval by the legislative body, and ratification by the executive body.

Approval by the legislative body is necessary for those cases regulated by Article 171 of the Constitution which considers, inter alia, those treaties that imply submitting to international jurisdiction, international arbitration, peace treaties, or economic, political or Central American integration treaties.

In Guatemala, the only office that can be considered to be specifically responsible for foreign investment, is the recently created "One-Stop Investment Office." This office is part of the Ministry of Finance, it has its own staff, with a General Directorate and Subdirectorate, department of Development and Dissemination and Registry Department. The main functions of this office are to: a) centralize within the Mercantile Registry, the registration process of companies, individual businesses and societies and their acts of commerce, branches and agencies; b) be aware of the warranty contracts related to their approval, according to bilateral and multilateral conventions signed by Guatemala, and c) be the liason with international organizations, according to bilateral and multilateral conventions signed by Guatemala.