GUATEMALA: An Introduction to Banking & Finance
Overview of the Banking and Finance Practice Area in the Republic of Guatemala
The banking and finance practice area in the Republic of Guatemala is dynamic, and requires specialised professionals capable of navigating the legal aspects of financial transactions and the regulatory framework governing financial institutions. This overview will discuss the current economic conditions affecting clients and law firms, the recent growth of the financial market, significant financings, upcoming legislative changes, the challenges posed by the government’s capacity for public investments and some fundamental institutional difficulties.
Current economic conditions
Guatemala’s economy continues to show resilience in the face of global economic challenges and uncertainty, maintaining steady growth rates. Even against the current backdrop of volatility and major conflicts, the Guatemalan central bank has revised economic growth by just 0.20% to an annual rate of 3.8%. This is a higher rate than the median for the world and for Latin America as a whole. However, the country still grapples with issues such as poverty, inequality, and the fact that more than 70% of the population is now employed in the informal economy. For clients and law firms in the banking and finance sector, these factors present both opportunities and challenges.
Inflation rates have been also lower than the Latin American median (the last report by Banco de Guatemala is 1.69%), notwithstanding the fact that oil prices are volatile and increasing. Additionally, the exchange rate has remained stable (with revaluation pressures due to the steady growth of remittances from emigrants to the US), providing some predictability for international transactions. For law firms, understanding these economic conditions is crucial to advising clients on risk management and strategic financial planning.
Growth of the financial market
Over the past twelve months, the Guatemalan financial market has experienced moderate growth. Loans to the private sector in general have risen by a little more than 10%. The banking sector has seen an increase in credit demand in almost every sector, but loans to productive activities have shown stronger expansion than consumer loans.
Significant financing activities have included large-scale projects and corporate deals. For instance, existing and new investors in the energy sector are preparing to procure financing for major investments for the enhancement of transmission facilities and power plants to supply an additional 1,400 MW to the country’s economy. Major corporations in sectors such as construction, agribusiness, and manufacturing have also secured significant financing, contributing to the overall growth of the financial market.
New legislation
A draft of the new Banking Act was submitted to Congress in 2016 and is expected to be considered soon, as well as a new Securities and Securities Exchange Act. This proposed legislation aims to modernise the regulatory framework for banking and securities markets. The former introduces the Basilea framework (at the time that it was prepared), and the latter is expected to enhance investor protection, increase market efficiency, and align Guatemala’s financial regulations with international standards.
For law firms, the upcoming legislation represents an opportunity to provide legal counsel on compliance, investment strategies and dispute resolution related to securities transactions. It also underscores the importance of remaining abreast of regulatory changes and their implications for clients engaged in the financial markets.
New Competition and Antitrust Law
Recently, President Bernardo Arevalo signed into law a new Competition and Antitrust Law applicable, inter alia, to the financial sector. To implement the new Competition Act of 2024, some of the nominating bodies have already appointed board members and alternate board members to the governing body of the new Superintendence of Competition.
The new law is expected to foster a more competitive environment, encouraging innovation and efficiency within the financial sector. Law firms specialising in banking and finance will play a pivotal role in helping clients navigate the complexities of this law, ensuring compliance and addressing any legal challenges that may arise.
Government capacity for public investments
The current government of Guatemala has sought and obtained the largest ever authorisation by Congress to issue treasury bonds, but continues to exhibit low capacity for public investments. This limitation is due to several factors, including budget constraints, bureaucratic hurdles and challenges in project execution. However, to face this situation, Congress passed a law – Ley de Infraestructura Vial Prioritaria – last November to develop highway priority infrastructure.
This presents new and fresh opportunities for the banking and finance practice area. Law firms can advise clients on alternative financing mechanisms, such as public-private partnerships (PPPs), to bridge the funding gap for public projects. Additionally, they can assist in structuring and negotiating financing agreements that align with the government’s fiscal constraints.
State of the Judiciary
As the Chief Magistrate of the Supreme Court is due to change soon, one of the significant challenges facing the banking and finance sector in Guatemala is its weak, unprofessional Judiciary that lack independence. The Judiciary’s inefficiency and susceptibility to external influences can undermine the enforcement of contracts, protection of property rights, and resolution of financial disputes.
For law firms, these judicial shortcomings necessitate a proactive approach to managing legal risks. This underscores the importance of thorough due diligence, robust contract drafting, and the use of alternative dispute resolution mechanisms to mitigate the impact of judicial inefficiencies on clients’ financial transactions.
A new US government
The administration of President Donald Trump has brought a set of global economic circumstances that financial entities, their clients, and business law firms need to consider. Guatemala’s macroeconomy rests on, among other pillars, the twenty-plus billion dollars of money remittances sent by approximately three million immigrants living in the US. Thus, any massive deportation from the US could have an impact. Also, President Trump has raised import tariffs into the US for several countries including Guatemala. Although negotiations are taking place with the USTR, it is uncertain when and how these will end.
Conclusion
The banking and financial sector in Guatemala, as well as the country’s economy, have so far withstood the significant challenges of 2025. Although there are major hurdles regarding international trade and emigration to the US, some domestic opportunities and improvements may balance out losses on the international front. Financial transactions will certainly be part of any strategy to navigate the volatile economic and political climate of today’s global economy.