This information comes from the assessment conducted in country for the Guatemala report, which was published in January 2005.
Guatemala’s company law is generally sound and covers most internationally recognized business entities. Minority shareholders are generally protected, and the incorporation process is among the more efficient in the region. Mechanisms of corporate governance, however, are weak, particularly with respect to internal controls over company administrators. Moreover, in virtually all instances, judges take an inflexibly formalistic view toward the notion of “lifting the corporate veil”; the legal personality of a company is generally protected even when it has been abused by its officers and directors.
Significant improvements are needed in the area of contracts. The legal framework could benefit from the development of provisions for modern contracts, such as leasing, as well as from the establishment of provisions for consequential and punitive damages. In addition, implementing and supporting institutions, including most lawyers, judges, and arbitrators, lack understanding of the contractual concepts used by modern international business.
Many implementation issues must be resolved in order for Guatemala to fully benefit from freer trade. The public and private sectors are aware of the need to harmonize many laws (within the region and in light of the Central American Free Trade Agreement (CAFTA)), enact more regional laws, improve trade infrastructure, educate the general public, and provide training to public officers. In addition, reform of Guatemala’s Customs Service is of paramount concern with respect to the ultimate ability to implement both CAFTA and the Customs Union.
Guatemala’s portfolio of trade infrastructure sufficiently meets the existing demands of the marketplace. Guatemala’s transportation infrastructure has benefited from successful implementation of public-private ventures.
