RESTRICTEDWORLD TRADE
ORGANIZATIONWT/TPR/G/94
14 December 2001
(01-6260)
Trade Policy Review Body Original:  Spanish
TRADE POLICY REVIEW
GUATEMALA
Report by the Government
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), the policy statement by the Government of Guatemala is attached.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Guatemala.Guatemala WT/TPR/G/94
Page 3
CONTENTS
I. INTRODUCTION................................................................................................................. ......................   5
II. ECONOMIC AND TRADE POLICY ENVIRONMENT ..........................................................................   5
(1) CHANGES IN THE ECONOMIC ENVIRONMENT ...................................................................................   5
(2) OPENING UP OF THE ECONOMY .......................................................................................................   7
(i) Law on Foreign Investment ................................................................................................... .......   7
(ii) Priva tization .............................................................................................................. ....................   7
(3) MARKET ACCESS ............................................................................................................................   8
(i) Summary of trade negotiations ............................................................................................... ......   8
(ii) Caribbean Basin Initiative (CBI) ........................................................................................... .......   9
(iii) Caribbean Basin Trade Part nership Act (CBTPA)........................................................................   9
(4) PROMOTION OF COMPETITIVENESS ................................................................................................. 10
(i) National Compe titiveness Pr ogramme.......................................................................................... 10
(ii) Consumer protection, promotion of competition and the National Quality System...................... 10
(5) DEVELOPMENT OF EXPORTS ........................................................................................................... 10
(i) Law on the Promotion and Development of Export and In-Bond Processing
Activities..................................................................................................................... .................. 11
(ii) Law on Free Trade Zones .................................................................................................... ......... 11
(iii) Institutional consolidation............................................................................................... .............. 12
III. TRADE POLICY DEVELO PMENTS 19 91-2001 ..................................................................................... 12
(1) INTRODUCTION .............................................................................................................................. 1 2
(2) MULTILATERAL TRADING SYSTEM ................................................................................................. 12
(i) Guatemala's accessi on to the GATT ........................................................................................... .. 12
(ii) Participation in the Uruguay Round and Membership of the WTO.............................................. 13
(iii) Basic tel ecommunications.................................................................................................. ........... 13
(iv) Agreement on Trade-Related Aspects of Intellectual Property Rights ......................................... 13
(v) Current negotiations........................................................................................................ .............. 14
(vi) Dispute settleme nt mechanism............................................................................................... ....... 14
(vii) Renegotiations un der Article XXVIII....................................................................................... .... 15
(3) REGIONAL FORUMS ........................................................................................................................ 15
(i) Central American Economic Integration....................................................................................... 15
(ii) Free-Trade Area of the Americas............................................................................................ ...... 16
(4) T RADE AGREEMENTS ..................................................................................................................... 16
(i) Mexico ...................................................................................................................... .................... 16
(ii) Dominican  Republic ......................................................................................................... ............ 16
(iii) Panama.................................................................................................................... ...................... 16
(iv) Canada..................................................................................................................... ...................... 16
(v) Chile....................................................................................................................... ....................... 17
(5) P ARTIAL SCOPE AGREEMENTS ....................................................................................................... 17
(i) Cuba ........................................................................................................................ ...................... 17
(ii) Venezuela and Colombia ..................................................................................................... ......... 17
(6) INVESTMENT PROMOTION AGREEMENTS ........................................................................................ 17
(7) UNILATERAL LIBERALIZATION MEASURES ..................................................................................... 17
IV. FUTURE POLICY DIRECTIONS .................................................................................................... ......... 17Guatemala WT/TPR/G/94
Page 5
I. INTRODUCTION
1. In recent years economic performance in Guatemala has been marked by the effects of the
introduction of stabilization and structural adjustment measures, as well as by the efforts to adapt the
domestic economy to the demands of the globalization process and to non-economic factors.
Furthermore, during the last decade, economic policy measures have been introduced with a view to
the economic modernization of the country, encouraging thereby greater openness of the nationaleconomy and the better allocation of resources.  In this connection, one of the objectives of the
country's economic policy in recent years has been to reduce the role of the State in the economy and
encourage greater participation by the private sector.
2. With regard to trade policy, Guatemala has taken part since 1960 in a process of integration
with the four other Central American countries, a process that has led to an increase in trade betweenthe countries, and provided greater sources of employment and national competitiveness, while
progress has also been made together with El Salvador, Honduras and Nicaragua in the construction
of a customs union.  In another context, it has been a Member of the World Trade Organization since
1995 and has participated in the formation, with the 34 countries of the region, of the Free-Trade Area
of the Americas (FTAA).  In a desire to speed up integration with its main trading partners, free tradetreaties have been signed and other trade agreements are being negotiated.  As a consequence of this
process the export sector has increased its share in the country's GDP.
II. ECONOMIC AND TRADE POLICY ENVIRONMENT
(1) 
CHANGES IN THE ECONOMIC ENVIRONMENT
3. A series of stabilization and structural adjustment measures were introduced in Guatemala
from 1991 onwards with the aim of increasing economic efficiency through the implementation of
measures to control inflation, strengthen the balance-of-payments and seek to create suitable
conditions for sustainable economic growth.  This involved a series of structural reforms in the areas
of trade, finance, public administration, monetary policy and fiscal policy, etc.  Thus, economic
performance in the period 1991-2000 was marked by the effects of the application of these measures,
as well as by the efforts to adapt the domestic economy to the demands of the economic globalization
process and to non-economic factors.
4. The period in question was marked by general price stability as a result of the efforts of the
monetary authority to match the levels of liquidity to the requirements of the economy and thus bring
about a gradual reduction in inflation.  Accordingly, the variation in domestic prices showed a
downward trend, with an average rate during the period of 9 per cent.  It should be added that in the
last four years inflation has averaged 6.1 per cent.
5. In recent years the basic objective of monetary, exchange and credit policy has been to
promote general price stability based on the conviction that that this is the best contribution that this
policy can make to achieving sustainable growth in production and employment and, consequently, to
the orderly development of the domestic economy.  Accordingly, in 2000 the strategy underlying the
monetary, exchange and credit policy was directed to restoring confidence in the currency andstrengthening the domestic financial system.  This strategic objective called for the disciplined
application of policy measures aimed at ensuring:  (a) a disciplined monetary policy;  (b) the
strengthening of the domestic financial system through modernization of the regulatory framework;
and (c) fiscal discipline.
6. In response to the challenges arising from the worldwide globalization process, at the end of
1989 the monetary authority decided to introduce great er flexibility into the foreign exchange market.WT/TPR/G/94 Trade Policy Review
Page 6
Accordingly, from 1994 onwards the exchange rate a nd the exchange allocation in that market were
allowed to find their own levels.  In addition, in 1996 the electronic system for foreign currency
transactions (SINEDI) came into operation, on the principle of bringing certainty and transparency to
operations carried out in the market by guaranteeing freedom in foreign exchange operations to
economic agents.
7. The balance-of-payments current account deficit as a percentage of the GDP exceeded 5 per
cent in some years during the last decade.  It should be pointed out that in those years the current
account deficit was financed, inter alia , by a net inflow of foreign capital which led to an increase in
the International Currency Reserves.
8. In 2000 the balance-of-payments current account balance as a percentage of GDP fell as
compared with the previous year, going from 5.5 per cent in 1999 to 4.8 per cent in 2000.  This resultwas helped by the performance of services and transfers, which recorded surpluses higher than in the
previous year.  In addition, in 1998 direct foreig n investment amounted to US$673 million as a result
of strong privatization activity.
9. During the last decade economic policy measures have also been introduced with a view to
the economic modernization of the country, encouraging a greater opening up of the domesticeconomy and a better allocation of resources.  Consequently, during the period 1991-2000 the Gross
Domestic Product (GDP) grew at an annual rate of 4.1 per cent, leading to a relative improvement in
the per capita income of the population.  It should be added that in recent years the country's
economic growth has been affected by various factors,  in particular the external shocks that have led
to a deterioration in the terms of trade, the damage caused by hurricane Mitch and the global
economic slowdown.
10. At the beginning of the decade the central government found itself in a critical situation with
a fiscal deficit of around 2 per cent.  That meant raising funds to cover current expenditure and left no
room for any increase in investment.  As a result, it became imperative to revise the fiscal policy with
a view to eliminating the above-mentioned deficit and avoiding an increase in the foreign debt.  By
the end of 2000 the fiscal deficit as a percentage of GDP amounted to 1.8 per cent and the tax burden
stood at 10.1 per cent.
11. The total trade in goods, that is to say exports together with imports, increased between 1991
and 2000 at an annual cumulative rate of 10.5 per cent.  Exports grew at an annual cumulative rate of
9.2 per cent, reaching an f.o.b. value of US$2,708.5 million in 2000, while imports increased at an
annual cumulative rate of 11.4 per cent, standing in 2000 at a c.i.f. value of US$4,885.3 million.
12. In the growth in the value of exports it is important to draw attention to the increase recorded
in exports of coffee and bananas, as well as of other products, to the rest of the world and to Central
America.  With regard to imports there were considerable increases recorded in consumer goods,
capital goods, raw materials, and fuel and lubricants.
13. A fundamental objective of the country's economic policy in recent years has been to reduce
the role of the State in the economy and promote gr eater private sector participation.  Accordingly,
from 1996 onwards as part of the economic policy measures directed towards the economic
modernization of the country the government initiated a process of disposing of State assets through
the sale of 80 per cent of the shares of the Empresa Eléctrica de Guatemala (EEGSA), 95 per cent of
the shares of the Empresa de Telecomunicaciones de Guatemala, S.A. (TELGUA) and of the
telephone-band operating concession, the sale of two distribution companies of the Instituto NacionalGuatemala WT/TPR/G/94
Page 7
de Electrificación (INDE), the usufruct of the railway company of Guatemala (FEGUA) and the
administration and operation of the postal services.
14. Another aspect of fundamental importance is the progress achieved in modernizing the
financial system under the auspices of the Modernization Programme for the National Financial
System.  In this connection, steps have been taken to strengthen the country's financial legislation, so
as to improve the competitiveness of the institutions on the one hand and, on the other, protect theinterests of depositors, as well as safeguarding the liquidity, solvency and stability of the national
financial system as a whole.
15. Within the framework of the programme to strengthen the national financial system the
following draft laws are now under discussion and aw ait approval by the relevant authorities:  the
Law on Banks and Financial Groups, the Law on Financial Supervision, the Organic Law of the Bankof Guatemala, the Currency Law, and the Law on Insurance Activities.  The legal reforms proposed
are intended to strengthen the national financial system and ensure greater supervision, by providing a
general legal framework that will bring greater legal certainty and help to make the financial
institutions more efficient, solid, transparent and competitive, on the basis of a preventative approach,
and thereby contributing to the development of the domestic economy and strengthening public trustin saving and investment.
(2) 
OPENING UP OF THE ECONOMY
16. For Guatemala the strong competition to attract investment and thereby take advantage of the
opportunities to achieve more rapid economic growth that will help to reduce the levels of poverty has
meant that policies and strategies to liberalize trade through various forms of negotiation, such as
bilateral treaties, free trade agreements, regional negotiations and multilateral agreements, are the
immediate objectives in strengthening the foreign trade policy.
17. A dynamic process of economic liberalization has been pursued with the other countries of
the Central American region in an attempt to construct an economic bloc that will strengthen our
negotiating position with the rest of the world.
(i) Law on Foreign Investment
18. This legal instrument was devised in 1998 in order to provide sufficient legal certainty for the
investor and his investment.  The idea was that the resulting benefits for the country, such as new jobs
through the generation of foreign investment, which, in its turn, would become a source of technology
transfer, would help to promote the growth and diversification of the country's economy through the
production and export of goods and services.
19. This law grants full security and protection for investments and free access, movement and
convertibility of foreign currency relating to the in itial capital investment transferred abroad either at
a later date or on account of the winding up, liquidation or voluntary sale of a foreign investment, or
in the case of compensation resulting from appropriation.  This involves the creation of a one-stop
facility for investments, having responsibility for providing all kinds of technical assistance and
facilitating administrative procedures for the investor so that he may establish himself in the country,where applicable, with the confidence that his commercial activities will receive national treatment.
(ii) Privatization
20. Governments have traditionally played a dominant role in all sectors of the domestic
economy;  however, Guatemala, in keeping with its  policy of opening up to the outside world, hasWT/TPR/G/94 Trade Policy Review
Page 8
carried out in the last ten years a whole series of privatizations in the main services sectors for the
benefit of the country, including the postal service with the concession granted to the Canadian
company, International Postal Service or Canada Post;  the telecommunications service;  the air
transport service, with 70 per cent under foreign ow nership;  the urban passenger transport service
with a 51 per cent foreign holding;  and the grantin g of concessions to provide loading/unloading and
port operation services.
(3) MARKET ACCESS
21. Guatemala's trade legislation is among the most open and currently applies import tariffs of
between 0 per cent and 15 per cent.  This reflects the adoption in 1997 of a Central American tariff
policy along the following lines:  raw materials, between 0 and 5 per cent;  intermediate and capital
goods, 10 per cent;  final goods, 15 per cent, with targets being established for the attainment of thesetariff levels.  Guatemala completed its timetable of tariff reduction in December 1999.  In order to
bring goods into the country, importers have to pay the valued added tax (VAT) of 12 per cent.
22. Guatemala has only once applied anti-dumping measures, against imports of grey portland
cement from Mexico.  At no time have the tariffs applied had to exceed the bound levels.  Most-
favoured-nation treatment has been applied without discrimination and national treatment is grantedto foreigners.
23. In accordance with its rights and obligations under the WTO, Guatemala applies only those
measures necessary to protect human, animal or plant life or health pursuant to the Agreement on the
Application of Sanitary and Phytosanitary Measures, the Agreement on Technical Barriers to Trade
and Article XX of GATT 1994.
(i) Summary of trade negotiations
24. A new era began in 1996 with the opening up of new export markets and the promotion of
competitiveness and product diversification.  This first objective was pursued through the
establishment of trade negotiations.
25. In this connection, and in accordance with the provisions of Article XXIV of GATT 1994,
negotiations began in 1996 to conclude a Free Trade Agreement with Mexico, which were completed
in May 2000.  The Agreement came into force in March 2001 and was the first instrument of this kindnegotiated by Guatemala.
26. In 1998 trade negotiations were initiated between Central America and Chile for a Free Trade
Agreement, which has not yet been finalized as the annexes and its tariff reduction timetables have
still to be negotiated.  In that same year a Free Trade Agreement was negotiated with the Dominican
Republic;  it was marked by the negotiation of immediate access between the parties under most ofthe tariff universe.
27. In 1999 a new generation partial scope agreement was signed between Guatemala and  Cuba
with a view to increasing trade in thos e areas where the economies are complementary.
28. In March 2000 tariff negotiations began for a free trade agreement between Central America
and Panama with a view to upgrading a free trade and preferential trade agreement betweenGuatemala and Panama which only benefited a limited number of goods and which, since it dated
from 1975, needed to be revised and upgraded in accordance with the new international legal
framework.Guatemala WT/TPR/G/94
Page 9
29. Guatemala is currently hoping to hold negotiations on a free trade treaty with Canada and, at
the same time, is participating actively in the co nstruction of the Free Trade Area of the Americas
(FTAA).
(ii) Caribbean Basin Initiative (CBI)
30. The Caribbean Basin Initiative (CBI) is a programme of the Government of the United States
to promote economic growth through tariff preferences for products originating from the CentralAmerican countries and the Caribbean area.  One of the main objectives of this programme is to
increase both domestic and foreign investment in non-traditional sectors with a view to diversifying
the economies of the countries of the region and thus increasing exports.
31. It has been in force since 1984 and grants total exemption from  import tariffs until 2008 on a
wide range of goods imported from the countries benefiting from the programme, provided that theconditions laid down for the enjoyment of such benefits are fulfilled.
32. The products that do not enjoy the benefits are clothing and textiles, canned tuna;  petroleum
and its derivatives;  footwear, with the exception of disposable articles and shoe parts;  some leather,
rubber and plastic gloves;  certain leather garments;  and clocks and clock parts.  In the case of
clothing and textiles there is a special programme (guaranteed levels of access), which guaranteesaccess to the American market for clothes made in the CBI countries from textiles manufactured and
cut in the United States, tariff duties being paid only on the added value (labour).
(iii) Caribbean Basin Trade Partnership Act (CBTPA)
33. The Caribbean Basin Trade Partnership Act (CBTPA), which came into force on
1 October 2000, granted the countries of the Caribbean Basin beneficial tariff rates and quotas for
goods which enter the United States market from those countries, but which are manufactured from
raw materials from the United States.
34. The CBTPA has significantly expanded preferential treatment for articles of clothing made in
the Caribbean Basin region.  Garments manufactured in this region from cloth made from yarn from
the United States are exempt from duties and quotas.  The same treatment is accorded to specific
knitted garments manufactured in the CBTPA beneficiary countries from cloth made in the Caribbean
Basin region, provided that United States yarn has been used in the manufacture of the cloth.  The"regional cloth" benefit for knitted garments is subject to an annual global restriction, with separate
restrictions from those which apply to certain kinds of T-shirts.
35. However, the new benefits for the Caribbean Basin countries also involve new
responsibilities.  Almost all the new special benefits require the use of American yarn for the
manufacture of garments.  On the basis of the precedents established by the NAFTA Agreement,special procedures have to be followed with regard to the import and export formalities so as to ensure
that the domestic goods fulfil the requirements laid down under the CBTPA.
36. It is estimated that there will have been a sustained increase in textile exports in 2001.
37. The statistics on exports and percentages of use under the different programmes from
October 2000 to June 2001 are as follows:WT/TPR/G/94 Trade Policy Review
Page 10
TOTAL PROGRAMME (dozens) % OF USE OF PROGRAMME
809 1,376,432 38.33
807ª 1,206,945 34.05
Regional cloth 755,135 21.30
T-shirts 206,137 5.82
(4) PROMOTION OF COMPETITIVENESS
(i) National Competitiveness Programme
38. Competitiveness has acquired great importance in a globalized and more competitive
environment, and the Government must therefore ac t to facilitate change and promote joint action
with the private sector.
39. The National Competitiveness Programme (PRONACOM) is the result of a regional initiative
that seeks to create in Central America a platform where productivity, investment and internationaltrade can take place on competitive terms with the most developed regions of the world.  Various
sectors participate in this programme on the basis of joint funding.
(ii) Consumer protection, promotion of competition and the National Quality System
40. With regard to consumer protection, competition policy and the National Quality System,
legal and institutional changes are being introduced, including the preparation of three draft laws andthe establishment of various institutions.  The draft laws are the Law on Consumer Protection, the
Law on the National Quality System and the Law on the Promotion of Competition.  The institutions
which it is planned to establish are the Office for Consumer Protection, the National Standards Centre,
the National Accreditation Centre, the National Metrology Centre and the Commission for the
Promotion of Competition.
41. The draft Law on Consumer Protection is intended to promote, publicize and protect the
rights of consumers and users, and establish the offences, penalties and procedures that apply in this
field.  The provisions of this law provide protection for consumers and users and constitute a
minimum standard of inalienable social rights and guarantees.
42. The Law on the National Quality System is a means of gaining entry into the world market
and promoting competitiveness and trade relations.  It creates mechanisms for the protection of the
domestic market for local and imported goods and services.
43. The Law on the Promotion of Competition seeks to promote free competition so as to increase
economic efficiency.  It regulates restrictive agreements or arrangements between enterprises, mergers
or acquisitions, and the abuse of a dominant market position, all of which may limit market access or
in some way unduly restrict competition.
(5) 
DEVELOPMENT OF EXPORTS
44. In seeking to open up the economy to the outside world and break with import substitution
and thus devise a new export model, conditions are being created for the development of industry.
The main purpose of these changes is to create employment, attract productive investment and raise
the level of income of the population.  The decisive factor in this process of change has been the
participation of a new generation of Guatemalan business people having links with foreign investorswith experience in the sectors of clothing and textiles, for whom the economic development lawsGuatemala WT/TPR/G/94
Page 11
represent an opportunity to take advantage of facilities that promote a diversification of industrial
activity.
45. In order to give an additional impetus to these changes the following Decrees have been
issued:  Decree No. 29-89 "Law on the Prom otion and Development of Export and In-Bond
Processing Activities" and Decree No. 65-89 "Law on Free Trade Zones".  The application of these
decrees has helped to create direct and indirect jobs, attract foreign investment and bring in foreigncurrency.
46. Through the promulgation of these laws 15 7,247 jobs had been created and 5,675 million
quetzals had been invested up to September 2001;  in addition, in 2000, non-traditional products to a
value of US$1,488 million were exported and foreign currency receipts for the export of non-
traditional products amounted to US$459 million.
47. For each job created through the implementation of the economic development laws it is
estimated that three indirect jobs are created, while each direct job benefits an equal number of
families having an average of five members.
48. During the 1990s these new policies helped to diversify and increase exports of non-
traditional products such as snow peas, broccoli, raspberries, strawberries, sesame, melons, textiles,wooden furniture, etc., as well as traditional products such as sugar, coffee, bananas, cardamom,
rubber, etc.
(i) Law on the Promotion and Development of Export and In-Bond Processing Activities
49. There are 860 enterprises operating under the terms of the Law on the Promotion and
Development of Export and In-Bond Processing Activities, mainly in the manufacture of clothes.  It is
worth noting that the application of this law has led to the establishment of related service and support
enterprises, mainly for the provision of air freight and maritime transport services.
50. The advantages granted under this law include the temporary admission of raw materials,
semi-finished products, intermediate products, packing materials, containers, labels, patterns, samples
etc;  the temporary admission of machinery a nd equipment, parts, components and accessories;
exemption from import taxes, customs duties and value added tax on the import of machinery and
equipment, parts, components and accessories;  exemption from income tax for ten years;  andexemption from ordinary and extraordinary export taxes.
(ii) Law on Free Trade Zones
51. The free trade zones have taken on an increasingly important role in Guatemala's economy.
There are currently 13 free trade zones in operation and eight more are being developed.  Of these free
trade zones only one is administered by the State.
52. The benefits for the entity administering the free-trade zone include exemption from taxes,
customs duties and charges that apply to the import of machinery, equipment, tools and material
intended for the construction of the infrastructure and installations;  exemption from income tax for
ten years;  and exemption from taxes, customs duties and other charges that apply to the import and
consumption of fuel oil, bunker oil and butane gas and propane for the generation of electrical power.
53. The benefits for the users of the free-trade zones include exemption from taxes, customs
duties and charges that apply to the import of machinery, equipment, tools, raw materials and other
materials used in the production of goods or the supply of services;  exemption from taxes, customsWT/TPR/G/94 Trade Policy Review
Page 12
duties and charges that apply to the import of goods or components that are stored in the free-trade
zone prior to their marketing;  exemption from income tax for ten years for industrial and service
users and for five years for commercial users;  and exemption from value added tax on the transfer of
goods from within and between free-trade zones.
(iii) Institutional consolidation
54. Efforts to modernize and strengthen the executive branch have resulted in a series of coherent
and comprehensive measures to adapt the laws, policies, institutions and ways of supplying services
as well as its management systems.
55. This process of modernization and institutiona l consolidation has involved the establishment
of various institutions needed to enable the State to respond to constant change.  They include the Tax
Administration Office responsible for the collection, administration, supervision and control ofdomestic taxes and import duties, and the Telecommunications Authority, a highly technical body
which administers and supervises the use of the radio spectrum and the telecommunications register.
56. In addition, the Ministry of the Economy has been restructured so as to enable it to ensure
Guatemala's effective participation in the multilateral trading system, as well as in regional and
bilateral agreements.
III. TRADE POLICY DEVELOPMENTS 1991-2001
(1) 
INTRODUCTION
57. In recent years there has been renewed interest in Guatemala in bilateral and multilateral
arrangements and agreements.  To date Guatemala has negotiated or is in the process of negotiating
trade agreements with Canada, Panama, Chile, the Dominican Republic, Central America, Mexico
and Cuba.  It also participates in the negotiations of the Free-Trade Area of the Americas and the
World Trade Organization (WTO).
58. During the last decade Guatemala has made significant progress in the degree of trade
liberalization, the promotion and diversificati on of exports and in conducting international
negotiations.  There have also been important advances in the reactivation of the Central American
Common Market and the application of the world trade rules established by the WTO.
(2) MULTILATERAL TRADING SYSTEM
(i) Guatemala's accession to the GATT
59. Guatemala acceded to the General Agreement on Tariffs and Trade 1947 on 10 October 1991
when the Uruguay Round was already in the process of being negotiated.
60. This important step for Guatemala marked a ne w era of trade liberalization which exchanged
the import substitution policy of the 1970s and 80s for an open outward looking policy of exportpromotion, coinciding with the beginning of a democratic presidential system and the new economic
and political environment that could just be discerned in the 1990s at the international level and
which, concurrently with the conclusion of the armed conflict, created better conditions to stimulate
the country's economic development.Guatemala WT/TPR/G/94
Page 13
(ii) Participation in the Uruguay Round and Membership of the WTO
61. During the negotiation of the Uruguay Round Guatemala recognized the need for an
international legally binding system that would regulate trade between countries, bringing certainty
and transparency in the application of their domestic laws, as well as the need for greater openness of
protected and captive markets so as to promote the exports of traditional and non-traditional products.
62. This was particularly important in the agricultural sector which represents one of the country's
main economic activities, since it contributes 23.4 per cent to the gross domestic product and involves
39 per cent of the working population.  The agricultural sector represents about 60 per cent of
Guatemala's exports, which are concentrated on traditional products such as coffee, sugar, bananas
and cardamom.
63. The negotiations of the Uruguay Round gave Guatemala an opportunity to improve the
conditions of access for its products and to ensure regulated trade and legal certainty, while enhancing
the possibility of expanding its exports to new markets, especially non-traditional products.
64. Guatemala's objective in joining the World Trade Organization was to participate in
disciplined trade involving the establishment of ta riff ceilings, commitments to reduce and regulate
subsidies, the tariffication of non-tariff barriers and a framework for international trade that wouldprovide a basis for improving the current terms of agricultural trade.
(iii) Basic telecommunications
65. Guatemala has launched an innovative programme of reform in the telecommunications
sector, consisting basically of two elements:  firstly, the breaking up of monopolies and market
liberalization at all levels in all services;  secondly, the privatization of the Empresa
Telecomunicaciones de Guatemala, S.A. (TELGUA), so as to promote efficiency in the provision of
telecommunications services.
66. In this connection, the General Telecommunications Law established a new regulatory
framework and set up the Telecommunications Authority as a highly technical supervisory body.
67. In addition, it was recognized that, in the absence of monopoly power in telcommunications,
regulation should be kept to a minimum and be based on competitive market forces which promote
innovation, efficiency and accessible prices for the consumer.
(iv) Agreement on Trade-Related Aspects of Intellectual Property Rights
68. In response to the commitments deriving from the Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS Agreement), the Ministry of the Economy introduced the
Industrial Property Law, which was approved on 1 November 2000 under Decree No. 57-2000.
69. This law provides protection for intellectual prop erty rights similar to that existing in other
countries, so that individuals and enterprises in Guatemala may enjoy legal remedies comparable to
those available to their competitors in other countries with more advanced legislation and thus be able
to prevent the copying or imitation of their products, manufacturing processes, trademarks,
tradenames, etc.  A consequence of this has been to encourage, in the country's industrial and
commercial activities, a continuing process of technology and quality improvement, therebyincreasing Guatemala's international competitiven ess through the internal development of these
factors, creating jobs in the formal sector and benefiting consumers.WT/TPR/G/94 Trade Policy Review
Page 14
70. In addition Guatemala established in June the first public prosecution service to deal with
offences in this field, so that any person who feels th at his rights have been infringed may file a claim
or application before this public prosecution service.
(v) Current negotiations
(a) Agriculture
71. For Guatemala the continuation of the reform process established in Article 20 of the
Agreement on Agriculture is of fundamental importa nce for strengthening  the multilateral trading
system and improving market access conditions.
72. In Guatemala the economic divisions in the agricultural sector have increased owing to the
fact that its exports compete at a disadvantage in markets that are highly protected and distorted by
domestic policies.
73. Guatemala is convinced of the need to work and advance towards greater liberalization of the
agricultural sector and will make all the necessary efforts to achieve that objective.
74. It is currently participating in these negotiations as a member of the Cairns Group.  The
proposals presented, as well as the statements made by the country, reveal the key points that
Guatemala considers to be vital to establish better conditions for access to international markets.  It isessential as part of this process to ensure that the negotiations give priority to and focus on specific
and binding commitments on market access, domestic support, elimination of tariff peaks, the
enlargement of quota volumes, the elimination or reduction of in-quota tariffs, the stronger and more
disciplined administration of quotas, bound tariff reductions, and the elimination of specific tariff
schemes with minimum prices.
(b) Services
75. Guatemala, in conformity with the negotia tions mandated in the Uruguay Round, has played
an active role in the preparatory process (guidelines) for the new negotiations of the General
Agreement on Trade in Services (GATS), which are taking place at the multilateral level at
forthcoming meetings within the WTO.
76. Guatemala has expressed its interest in seeing the regulatory framework of the GATS made
more specific and, in some cases supplemented, in particular with regard to safeguards and subsidies.It is to be hoped that in the course of these negotiations the developed countries will undertake to
apply fully the commitments they have already made , particularly with regard to the movement of
individuals or mode 4.
77. In this connection, it is hoped that these negotiations will lead to the elimination of most of
the exceptions to most-favoured-nation treatment in  accordance with the level of development of the
Member countries.
(vi) Dispute settlement mechanism
78. The basic objective of the dispute settlement mechanism is to ensure certainty and
predictability in the WTO multilateral trading system.  It is a system that favours solutions reached by
mutual agreement, provided they are compatible  with the WTO Agreements, and the parties are
encouraged to adopt mutually satisfactory solutions that have been accepted.Guatemala WT/TPR/G/94
Page 15
79. It is important to point out that Guatemala has made use of the dispute settlement system
mechanism which ensures the legality of the system, and that where there are deficiencies as a result
of legal lacunae or alternatives that were not foreseen in the negotiations of the mechanism, additions
and improvements may be introduced in the forthcoming negotiations.  Special and differential
treatment should also be taken into account and granted to the developing countries with small
economies.
(vii) Renegotiations under Article XXVIII
80. Chile imposed a safeguard measure on imports of sugar, which is due to expire in
November 2001.  The main argument for that measure was that the price band exceeded Chile's WTO
bound tariff of 31.5 per cent on imports of sugar.  On this basis, Chile initiated under the mechanism
contained in Article XXVIII of the GATT a renegotiation to increase the bound tariff.  Under thisprocedure Chile is obliged to negotiate with the main supplier of the product in question, which in this
case was Argentina, and with the suppliers having a substantial interest, which included Guatemala
and Brazil.  The result of the negotiations was the granting of a specific tariff quota for each country,
which in the case of Guatemala was a quota of 16,700 metric tonnes of refined sugar at a tariff of
0 per cent, whereas outside the quota the bound tariff was increased to a maximum of 98 per cent.
(3) 
REGIONAL FORUMS
(i) Central American Economic Integration
81. The Central American Presidents, recognize the need to give new impetus to the process of
Central American economic integration and basing their action on the principles of the General Treaty
on Central American Economic Integration, stated in Article XV of the Protocol to the General Treaty
on Central American Economic Integration (Guatemala Protocol), signed on 29 October 1993, that
"the States' parties undertake to establish a customs union between their territories for the purpose ofgiving free transit to goods independently of their origin, following customs clearance, in any of the
Member States, of the products from third countries.  This customs union will be introduced gradually
and progressively on the basis of programmes established to that effect and approved by consensus".
82. The Presidents of El Salvador and Guatemala expressed in a Joint Statement their agreement
to initiating the process to achieve a customs union through the implementation of such specificmeasures as the harmonization of tariffs, customs, sanitary registers, taxation, foreign trade policy,
trade rules, etc, which was formalized through the publication of the Framework Agreement for the
Establishment of a customs union between the territories of the Republic of El Salvador and the
Republic of Guatemala, signed in Guatemala City on 13 January 2000.
83. These two countries have achieved substantial progress with regard to tariffs, customs
harmonization, sanitary registers, tax harmonization, etc.  Work on these issues has continued
between El Salvador, Guatemala, Honduras and Nicaragua and on 29 August 2000, by means of
Resolutions No. 56 and 57, the Council of Minist ers for Economic Integration (COMIECO) expressed
its agreement to the decision of the Governments of Nicaragua and Honduras to formally join the
customs union process initiated by El Salvador and Guatemala, which is the process within which thecurrent efforts to achieve integration are taking place.  It is hoped that Costa Rica will soon join the
process so that the whole region can become a single  customs area, before proceeding stage by stage
towards the creation of an economic union.WT/TPR/G/94 Trade Policy Review
Page 16
(ii) Free-Trade Area of the Americas
84. In the Declaration of the Presidents of the Summit of the Americas held in Miami in 1994 the
countries undertook to construct a free-trade area, the negotiations of which would be concluded in
2005.  Guatemala has participated actively in the negotiating groups established by the Ministers of
Trade so as to ensure adequate treatment, as a country with a relatively lower level of economic
development, in respect of the subjects currently being negotiated.
(4) TRADE AGREEMENTS
(i) Mexico
85. The trade agreement signed by Guatemala, Honduras and El Salvador with Mexico came into
force on 15 March 2001 and was the first instrument of this kind signed by Guatemala.  This
agreement will enable Guatemalan industry, agriculture and business to export more goods to Mexicoat lower tariff rates than at present.  In addition, it will encourage foreign investment in Guatemala for
the purpose of exporting to the Mexican market.
(ii) Dominican Republic
86. Guatemala, together with Honduras, El Salvador, Nicaragua and Costa Rica, signed a free-
trade agreement with the Dominican Republic on 16 April 1998, which came into force on 15 October2001.  This agreement establishes a free-trade area of 40 million people.  Some of the more important
objectives that it seeks to achieve are the following:  to stimulate the expansion and diversification of
the trade in goods and services between the parties;   to promote conditions of free competition within
the free-trade area, through the reciprocal elimination of trade barriers to goods and services
originating in the parties' territories:  to promote and protect investment directed to making intensive
use of the advantages that are offered by the parties' markets;  and to establish effective procedures for
the application and implementation of this agreement as regards its joint administration and thesettlement of disputes.
(iii) Panama
87. The purpose of negotiating this free-trade agreement is to create an instrument to update the
existing bilateral preferential agreements on trade lib eralization and include access to trade in services
and investment opportunities.  The normative part was signed on 16 May 2001 in Panama City andthe annexes, which include the schedules of tariff reductions and the services sector reservations, are
expected to be negotiated shortly.
(iv) Canada
88. Trade with Canada is at a relatively low level.  However, given the respective productive
structures, it would appear that the two markets are complementary and not direct competitors, so thatthere is considerable potential for trade, and cons equently negotiations for a free-trade agreement will
be pursued jointly with El Salvador, Honduras and Nicaragua.
89. To date, three informal meetings have taken place so as to determine the general aspects of
the negotiations.  It is hoped that formal negotiations will begin during the first half of
December 2001.Guatemala WT/TPR/G/94
Page 17
(v) Chile
90. On the occasion of the II Summit of the Americas held in Santiago, Chile, the Presidents of
the Republics of Chile, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua agreed at a
meeting on 17 April 1998, to speed up the process of hemispheric integration through direct
negotiations for a free-trade agreement between those countries.  As a result, negotiations began in
Managua, Nicaragua, on 17 August 1998 at a meeting of deputy foreign ministers of Central Americaand Chile.  Finally, on 18 October 1999, in Guatemala City, the Presidents of Costa Rica, El Salvador,
Honduras, Guatemala, Nicaragua and Chile signed th e definitive text of the Free-trade Agreement
between Chile and Central America.  To date, the annexes are still awaiting negotation.
(5) P
ARTIAL SCOPE AGREEMENTS
(i) Cuba
91. The Partial Scope Agreement between Guatemala and Cuba was signed in Havana on
29 January 1999 and came into force on 18 May 2001.  Its objective is to grant tariff preferences and
eliminate non-tariff restrictions so as to facilitate, expand, diversify and promote trade between
Guatemala and Cuba, as well as to adopt measures and pursue actions so as to stimulate the process of
Latin American integration.
(ii) Venezuela and Colombia
92. In 1984 and 1985 Guatemala signed Partial Scope Agreements with Colombia and Venezuela.
Steps have been taken in recent months to renegotiate these agreements with a view to increasing
trade.
(6) INVESTMENT PROMOTION AGREEMENTS
93. As part of its policy to protect foreign investment through agreements for the promotion and
reciprocal protection of such investment, Guatemala grants substantial guarantees, includingguarantees of due legal process on the reception of such investment, as well as protection and stability
for the investor.  Agreements of this kind have been negotiated and approved in recent years with
Argentina, Chile, Chinese Taipei, Cuba, France, Korea and the Netherlands.  Other agreements are
currently going through the legislative process for approval or are being negotiated.
(7) 
UNILATERAL LIBERALIZATION MEASURES
94. From 1986 onwards a process of trade liberalization was initiated through the elimination of
95 per cent of non-tariff restrictions, such as quotas and export licences, and the reduction of tariff
levels from an average of 60 per cent to the current 7.38 per cent, with a ceiling of 15 per cent and a
floor of 0 per cent as of 1996.  This liberalization substantially reduced the anti-export bias resulting
from tariffs on imported inputs.
IV. FUTURE POLICY DIRECTIONS
95. The basic objective of monetary, exchange and credit policy will continue to be to promote
general price stability.  Thus, efforts will continue to be made to strengthen the country's financial
legislation so as to improve the competitiveness of institutions and protect the interests of depositors,
as well as the liquidity, solvency and stability of the domestic financial system as a whole.WT/TPR/G/94 Trade Policy Review
Page 18
96. Guatemala will continue to shape its trade policies so as to attract investment and create
conditions for development, using for this purpose various forms of trade negotiation.
97. Guatemala considers the WTO to be the proper forum to promote trade liberalization and
economic development throughout the world.  It believes that these objectives can only be achieved if
the Member States continue to observe the basic rules and fundamental principles of non-
discrimination, transparency and the adoption of decisions by consensus.  Accordingly, it willcontinue to exercise the rights and respect the undertakings acquired within the WTO and will only
apply those measures that the WTO Agreements themselves permit.
98. The country is fully determined to maintain an open market and will continue to apply its
policy of trade promotion and liberalization.  Accordingly, it will continue to seek to conclude
bilateral and regional agreements with a view to supplementing the multilateral efforts on behalf oftrade liberalization.
__________