By: Emanuel Callejas, Paola Montenegro and Gabriel Cabrera1 

Just as countries have taken health measures to combat the COVID-19 pandemic, they have also taken steps to leverage the economic crisis generated by the pandemic. This effort involves legislative and regulatory changes to reduce the effects of the crisis.


The COVID-19 pandemic has caused an economic global crisis with local impacts. Governments around the world have taken key economic responses to limit economic and human impact of the COVID-19 pandemic by applying social compensation measures with emphasis on the most vulnerable population. The Government of Guatemala has also implemented measures to address the economic crisis in the country.

Guatemala has experienced continued economic stability that can be attributed to a combination of inflation targeting, prudent fiscal management and managed floating exchange rate. The country has been a solid economic performer in recent years, with a GDP growth rate of 2.8 percent in 2017, 3.1 percent in 2018 and 3.6 percent in 2019. Due to the impact of the COVID-19 pandemic, Guatemala’s economy is expected to post a -1.8 percent decline in 2020 and to grow 4.4 percent in 2021.[1]

This article focuses on the economic impact derived from the COVID-19 pandemic in Guatemala, and the measures adopted by the Government of Guatemala to deal with this impact locally.

Government Policy Reponses

According to the United Nations (“UN”), the measures adopted by the Government of Guatemala to reduce the contagion of the COVID-19 pandemic have been timely, fast and energetic.[2] As of May 5, Guatemala has reported 730 confirmed cases and 20 fatalities of COVID-19.

The Government of Guatemala has issued and reviewed provisions weekly since March 2020 to reduce the contagion of COVID-19. On March 13th, the government declared the State of Calamity. As of May 5, the following general measures are in force:

  1. Freedom of movement is restricted between 6:00 p.m. to 4:00 a.m. Business with authorization to operate can only do so from 4:00 a.m. to 4:00 p.m;
  2. Unessential activities in the private and public sectors are suspended. The activities considered essential that may continue to operate are the following: Hospitals and medical clinics; Water supply; Garbage removal services; Public security services; Private security services and securities transport companies; Air navigation services; Telecommunications services; The port and airport system; Heavy cargo transportation; Food industry, including its complementary activities; Pharmaceutical industry; Industry of health and personal hygiene products; Energy industry; and Banks, finance, companies, insurers and cooperatives.
  3. Additionally, the use of a face mask is mandatory in all open and public spaces;
  4.  Air, land and sea boarders as closed, limited to certain emergency relief necessities;
  5. Travel between certain departments is prohibited.

All the above-mentioned measures have had a significant effect on the economy of Guatemala, causing various layoffs, work suspensions, closure of entities and more. To address these effects and consequences, the Government of Guatemala has taken certain measures which will be discussed below. 

Projections on the post-COVID economy

Due to the impact of the COVID-19 pandemic, Guatemala’s economy is expected to post a -1.8 percent decline in 2020 and to grow 4.4 percent in 2021. This is an optimistic scenario for Guatemala, as it seems, according to local scholars, that the country will not be tragically impacted by the crisis, as compared to other countries of its size and similar performance.

The Economist ranked 66 economies across 4 potential sources of peril. These include public debt, foreign debt (both public and private), and borrowing costs (proxied where possible by the yield on a government’s dollar bonds). They also calculate their likely foreign payments this year (their current-account deficit plus their foreign-debt payments) and compare this with their stock of foreign-exchange reserves. A country’s rank on each of these indicators is then averaged to determine its overall standing.[3]

Of the 66 economies evaluated, Guatemala is in 11th place, ranking very high compared to the rest of the Central American countries. Guatemala is the Central American country with the best position to face the crisis.

Of the 4 measures of financial strength evaluated by the study (public debt, foreign debt, cost of borrowing and reserve cover), Guatemala has a high rating in each of them and all are strong.

The Minister of Economy also predicts that even by the end of the year, the country may reach a positive growth rate. The Minister's opinion was recorded after a meeting held in mid-April with ministers and vice ministers of the Ministries of Economy, Development, Energy and Mines, Agriculture and Finance, as well as officials from the Bank of Guatemala and the Tax Administration, to analyse the emergency caused by the disease.[4]

Operation of institutions

As stated above, Government of Guatemala has issued and reviewed provisions weekly since March 2020 to reduce the contagion of the COVID-19 pandemic. One of the measures taken by the government was the suspension of work and activities in the public and private sector, allowing and encouraging public and private institutions to work remotely.  

The private sector has been able to implement home office measures with ease, but the public sector has experienced some difficulties. Public institutions in Guatemala don’t have the technology or resources to make all public employees work from home or adapt and respond to these remote environments. Despite this obstacle, some institutions have managed to continue providing their services through their websites.

Such is the case of the Ministry of Labour, Ministry of Economy, Ministry of Public Finance and other institutions of the Executive Branch. Other institutions, such as the Tax Administration, have chosen to establish specific days and schedules to serve the public.

The Legislative Body has continued to operate normally, and congressmen have been attending the Congress when they are summoned to discuss a law initiative or a reform.

As for the Judicial Branch, there is no legislation in Guatemala that regulates the operation of virtual courts in full, although certain provisions allow certain hearings to be held via teleconference. It has been a challenge for the Judicial Branch to continue its operations. Initially, only the criminal courts could operate. Currently, civil and labour courts are allowed to operate only for constitutional matters and urgent proceedings.

The labour courts have been the only ones to successfully implement remote office technologies. Even a few judges and authorities have managed to deliver their decisions from a distance.

Legislative and regulatory changes

In addition to the economic measures developed below, the Congress of the Republic has not issued any other laws in agenda at the start of this new legislature (2020). The only reform it made was to the Code of Commerce, introducing the figure of the electronic check into Guatemalan legislation.

Through Decree Number 6-2020 of Congress of the Republic, the use of the electronic check was authorized, with the purpose of adapting to the new techniques and modalities of modern financial systems and of promoting international best practices.

Some of the applicable amendments are: the same validity and effects are granted to the digitized check as to the physical check, especially in the presentation of the check in the clearinghouse; the annotation made on the check of having been presented on time and not paid (protest); and others.

Furthermore, banks are required to have digitized copies of the physical checks paid, before destroying them. As of today, banks have not disclosed the mechanics or templates of digitized checks, nor how they shall be issued.

As to broader financial sector measures implemented by regulators, the Monetary Board of the Bank of Guatemala, through Resolution 32-2020, instructed the supervised entities by the Superintendence of Banks, to take measures favourable to users due to the crisis generated by the COVID-19- pandemic.  Such measures include the following:

  • For all credit assets that as of February 29, 2020 are not past due for more than one month, the supervised institutions will be able to control the interest rates and terms.
  • Said institutions may establish payment delays or deferrals, considering the particular situation of the debtor, without considering such circumstance as a factor of increased risk. For these cases, the calculation of the arrears provided in Article 27 Bis of The Regulations for the Administration of Credit Risk, is temporarily suspended.
  • The corresponding modifications can be made at the request of the debtors, or by direct initiative of the entities themselves, and shall not generate additional costs to the debtor.

It is important to note that the Bank of Guatemala reduced its leading interest rate by 25 percentage points, changing the leading interest rate from 2.25 to 2.00.

Also, the Monetary Board of the Bank of Guatemala, through Resolution 42-2020 established amendments on the Regulations for the Administration of Technological Risk requiring, among other things, measures for cybersecurity and disaster recovery plan to some financial institutions.

As of Tax Measures, the Tax administration is not operating and is currently not exercising all of its powers such as audit procedures and demanding the fulfilment of tax obligations to taxpayers. Nevertheless, it is important to mention that the fact that the Tax Administration does not exercise all its powers or refrains from initiating procedures, audits and inspections, does not limit the taxpayer to comply with his obligations.

Economic measures

So far, it has been reported by media that at least 21,859 employees from 752 companies have been suspended due to the crisis generated by COVID-19 and it is expected that more than 46,000 employees will be suspended. The following funds were created to help businesses during the crisis generated by COVID-19, through decrees by Congress: a the) Emergency Law to Protect Guatemalans from the Effects Caused by the Coronavirus Pandemic COVID-19, Decree 12-2020, and b) the Law of Economic Rescue to Families for the Effects Caused by COVID-19, Decree 13-2020:

1. Family Bonus Fund:

This fund was created to support the most economically affected population by the emergency measures derived from COVID-19. The fund will be executed by the Ministry of Social Development through the banking system, its entities and financial groups, which must facilitate the opening of monetary accounts, as well as the delivery of the benefit. This Fund will be constituted for the amount of Q.6,000,000,000.00  (equivalent to approximately USD 777,659,280.00) to grant contributions of up to Q.1,000.00 (equivalent to approximately USD 130) per family.

The exclusions to opt for this benefit are:

  • Households whose monthly electricity consumption exceeds 200 kWh;
  • Public servers;
  • Those who have administrative contracts for the provision of services in force with the public sector or those who receive benefits derived from any pension system.

2. Employment Protection Fund:

This fund aims to support private sector employees whose employment contracts have been suspended with the due authorization of the Ministry of Labor and Social Security, because of the State of Calamity. This Fund will be administered by the The National Mortgage Credit (Crédito Hipotecario Nacional (“CHN”)) and executed under the guide of the Ministry of Economy in coordination with the Ministry of Labor and Social Security, both ministries will define the conditions and requirements for accessing to the benefit of this Fund.

The Fund is constituted for an amount of Q. 2,000,000,000.00 (equivalent to approximately USD 259, 327,200.00 ) that can be granted to the authorized beneficiaries for a fixed amount of Q. 75.00 (equivalent to approximately USD 10.00 ) per worker per day, this economic benefit is exempt from any type of deduction or tax. 

3. Capital Protection Fund:

This Fund is administered by the CHN and was constituted with an amount of Q. 250,000,000.00. (equivalent to approximately USD 32,421, 525.00), destined to grant credits to: individual merchants, professionals, companies, savings and credit cooperatives, which must be placed with preferential interest rates not higher than the average of the current passive rate that governs the Guatemalan banking system.

The Decree grants powers to the Ministry of Public Finance to complement the above-mentioned amount by a budgetary readjustment. The CHN must prepare specific regulations on credit conditions and requirements. 

4. Fund for Micro, Small and Medium Enterprises -MIPYMES:

This fund is created by the Ministry of Economy, through the Vice Ministry of Development of Micro, Small and Medium Enterprises, to strengthen small and medium companies with a revolving amount of Q400,000,000.00. (equivalent to approximately USD51, 874,440.00) In order to promote the entrepreneurship of small and medium entrepreneurs, credits must be placed with preferential interest rates no higher than the average of the current passive rate that governs the Guatemala Banking system.

The loan applicant must use the funds to finance its business and entrepreneurship activities. It is prohibited to use the funds for personal consumptions expenses, superfluous expenses or not related to their business activity.

5. Working Capital Credit Fund:

This fund is created with the purpose to finance directly, or through the necessary financial mechanisms, working capital with soft conditions to maintain the productive capacity. The Executive Body is authorized to make transfers to the CHN through State Obligations in Charge of the Treasury, up to the amount of Q3,000,000,000.00 (equivalent to approximately USD389,058,300.00). Said bank will allocate them to the creation of the Working Capital Credit Fund, to finance directly or through other financial instruments legally authorized through other financial entities.

The destination of the resources will be used exclusively for grating loans with soft conditions, for a maximum amount of Q250,000.00 (equivalent to approximately USD32,000.00), for individuals and legal entities in order to finance working capital and promote continuity in business operations.

In addition, the Guatemalan Social Security Institute (“IGSS”) is authorized to defer the payment of the employer’s contribution for the months of March, April and May 2020, which will not be subject to any surcharge for late payment. Therefore, the employers now have 3 options to pay their contributions:

  • Employers can continue to pay the corresponding fees within the usual terms.
  • Employers may defer payments for March, April and May in the months of July, August and September 2020, respectively.
  • Those who do not opt for the previous option, the IGSS will automatically distribute the total deferred amount owed in up to 18 monthly installments as of July 2020.

The employee’s contribution must continue to be deducted from his salary.

Finally, the Ministry of Labour, thorough the Ministerial Agreement 140-2020 to Facilitate the Suspension of Employment Contracts for Companies, created the electronic procedure for the registration, control and authorization of suspension of labour contracts due to force majeure derived from the State of Exception ordered by the President of the Republic of Guatemala and its Ministers, and approved by Congress to address the COVID-19 emergency (“State of Public Calamity”). The purpose of this procedure is to avoid crowds of people at the Ministry of Labour by providing companies electronic resources to suspend employment due to the COVID-19 outbreak.


Guatemala has taken steps to retain COVID-19 and to address the crisis generated by the pandemic. This allows the country to position itself among the countries that will have a positive projected outcome from the period when its economy was inactive. The authorities not only took health measures promptly, but also implemented funds to protect the most vulnerable population in economic terms. It is expected that in the following weeks, Guatemala will reach the peak of expected infections (on a first wave), and that the Government of Guatemala will begin to apply funds approved by Congress within the annual budget and from authorized loans to aid and alleviate the effects of the pandemic in different sectors, mainly Health. Oversight to this process is expected.