Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

GUATEMALA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: January 27, 1947.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
International security restrictionsNo.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of Guatemala is the Guatemalan quetzal.
Exchange rate structureUnitary.
Classification
Managed floating with no predetermined path for the exchange rateThe exchange rate is determined in the foreign exchange market; however, the Bank of Guatemala (BOG) intervenes in the foreign exchange market to reduce volatility in the nominal exchange rate without having a specific exchange rate path or target. The BOG’s intervention in the exchange market is based on a specific, transparent, and comprehensible rule for the market. The BOG purchases foreign exchange on behalf of the public sector and to service its own external debt. All foreign exchange transactions of the public sector must take place through the BOG at a reference rate that is equivalent to the weighted average of the buying and selling rates in the foreign exchange market of operations exceeding $50,000 during the previous business day.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketThe Bolsa de Valores Nacional, S.A., is responsible for the operation and administration of the forward exchange market.
References to legal instruments and hyperlinksMonetary, Exchange, and Credit Policy: Evaluation of November 2006 and Proposal 2007; www.banguat.gob.gt; Bolsa de Valores Nacional de Guatemala: www.bvnsa.com.gt.
Arrangements for Payments and Receipts
Prescription of currency requirementsIn practice, most transactions in foreign exchange are denominated in dollars, in accordance with special payments agreements.
Controls on the use of domestic currency
For capital transactionsThe issue of securities denominated in foreign exchange by banks and other financial institutions requires prior approval by the Monetary Board.
Transactions in capital and money market instrumentsYes.
Payments arrangements
Bilateral payments arrangements
OperativeThe Panama-Guatemala Clearing and Credit Reciprocal Agreement remains in effect.
InoperativeThe Clearing and Credit Reciprocal Agreement between Guatemala and Costa Rica, El Salvador, and Honduras functioned until 1995, and the Mexico-Guatemala Clearing and Credit Reciprocal Agreement functioned until 2002.
Regional arrangementsGuatemala is a member of the CACM.
Clearing agreementsYes.
Administration of controlThe Monetary Board (which includes representatives of the BOG and the MOF) approves annually Guatemala’s exchange policy. The BOG administers the exchange regime and may buy and sell foreign exchange to implement this policy.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotesNo.
References to legal instruments and hyperlinksMonetary, Exchange, and Credit Policy: Evaluation of November 2006 and Proposal 2007; Free Foreign Exchange Convertibility Law; www.banguat.gob.gt.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyNo.
References to legal instruments and hyperlinksFree Foreign Exchange Convertibility Law; www.banguat.gob.gt.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyNo.
Blocked accountsNo.
References to legal instruments and hyperlinksFree Foreign Exchange Convertibility Law; www.banguat.gob.gt.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measuresImports of most goods are unrestricted and require neither registration nor a license. However, imports of some agricultural commodities and animal products are subject to nontariff restrictions.
Negative listThe list includes goods considered dangerous to society, such as weapons, certain chemicals, and drugs. Weapons may be imported only with the approval of the appropriate department.
Open general licensesYes.
Other nontariff measuresn.a.
Import taxes and/or tariffsGuatemala applies the CET for processed goods from CACM countries, which ranges from zero to 15%; virtually all other intra-CACM trade is exempt from tariffs. The maximum tariff rates on raw materials and intermediate and capital goods not produced in Central America are 5% and 10%, respectively; the tariff rate on raw materials and intermediate and capital goods produced in Central America is zero.
Some processed products, such as coffee, sugar, oil, wheat, and alcohol, that are traded with CACM countries are subject to tariffs ranging from zero to 40%. Guatemala’s tariff structure continues to exempt certain processed products from the maximum CET rate of 15%. The tariff rate for most footwear and textiles is 14%, and rates for tires range from 5% to 15%. In addition, certain agricultural products enjoy safeguard provisions and are subject to tariff rate quotas under WTO rules, which also allow tariffs well above the maximum rate for imports in excess of their quota. Apples are subject to a quota of 11,500 metric tons a year, with tariffs of 12% within quota and 25% in excess of quota, and yellow corn is subject to a quota of 88,670 metric tons a year, with a tariff of zero within quota and 35% in excess of quota. These quotas are adjusted yearly, following discussions between the private sector and the government.
A trade agreement exists among El Salvador, Guatemala, Honduras, and Mexico, giving certain tariff benefits to the participants. There is also a trade agreement with the Dominican Republic. The Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR) came into effect on July 1, 2006. Under this agreement, duties are imposed on 6,307 items divided into different staging categories. Among those, the following categories apply to the goods traded between Guatemala and the United States: (1) category B contains products such as chicken breasts, fish, and vegetables that are being phased in over a five-year term and in 2007 are subject to a duty of 7%; (2) category C contains 788 items whose duties will be eliminated in 10 equal annual phases, beginning January 1 of year one; (3) category D contains those products that will be phased in over a 15-year term and includes dairy products, green coffee, decaffeinated coffee, sugarcane, and alcoholic drinks; for 2007 the duties are 8%, 12%, 16%, and 32%, respectively; (4) category F contains milk and yogurt, which must remain at base rates for years 1 through 10; they will then decrease in 10 equal annual phases and will be duty-free in year 20; the effective duty for 2007 is 15%; (5) duties on goods, such as rum, sausages, and wheat flour, provided for in the items in staging category N must be removed in 12 equal annual phases beginning on the date CAFTA-DR entered into force, and such goods will be duty-free effective January 1 of year 12; the duties foreseen for 2007 for rum, sausages, and wheat flour are 30%, 11.25%, and 7.5%, respectively; (6) duty on black beans provided for in the item in staging category O will remain at base rates for years one through six. On January 1 of year seven, the duty will be reduced by 8% of the base rate, and by an additional 8% of the base rate each year thereafter through year 11. On January 1 of year 12, the duty will be reduced by an additional 15% of the base rate, and by an additional 15% of the base rate each year thereafter through year 14, and such goods shall be duty-free effective January 1 of year 15; and (7) duty-free products for which quota quantities were allocated, such as beef, cheese, milk powder, butter, ice cream, pork, yellow corn, white corn, rice, and chicken leg quarters. The applicable tariffs above quota on these products are 13%–15% for beef, 15% for milk powder, 13%–15% for pork, 28%–35% for yellow corn, 20% for white corn, and 164.4% for chicken leg quarters.
State import monopolyNo.
References to legal instruments and hyperlinksCentral American Tariff System; www.sieca.org.gt; www.portalsat.gob.gt/portal; Ministry of Economy of Guatemala; www.mineco.gob.gt.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licenses
With quotasExports of sugar to the United States are subject to quotas.
Export taxesNo.
References to legal instruments and hyperlinksFree Foreign Exchange Convertibility Law; www.banguat.gob.gt.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
References to legal instruments and hyperlinksFree Foreign Exchange Convertibility Law; www.banguat.gob.gt.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsNo.
Repatriation requirementsNo.
Controls on capital and money market instrumentsNo.
Controls on derivatives and other instrumentsNo.
Controls on credit operationsNo.
Controls on direct investment
Inward direct investmentForeign direct investment in the petroleum sector is regulated by special legislation.
Controls on liquidation of direct investmentNo.
Controls on real estate transactionsNo.
Controls on personal capital transactionsNo.
References to legal instruments and hyperlinksFree Foreign Exchange Convertibility Law; www.banguat.gob.gt; Ministry of Economy of Guatemala; www.mineco.gob.gt; Ministry of Energy and Mines; ww.mineco.gob.gt.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Purchase of locally issued securities denominated in foreign exchangeThe purchase of privately issued securities requires prior approval from the Monetary Board.
Investment regulations
Abroad by banksYes.
In banks by nonresidentsYes.
Open foreign exchange position limitsBanks are required to maintain positions as instructed by the monetary authorities. The difference between total assets and total liabilities (including future payments and contingencies in foreign currency) may not exceed 60% of paid-up capital and reserves. If the difference is negative, it may not exceed 20% of paid-up capital and reserves.
Provisions specific to institutional investors
Insurance companies
Limits (max.) on securities issued by nonresidentsYes.
Limits (max.) on investment portfolio held abroadYes.
Limits (min.) on investment portfolio held locallyYes.
Pension fundsn.a.
Investment firms and collective investment fundsn.a.
References to legal instruments and hyperlinksBanks and Financial Groups Law; Investment Law of Technical or Mathematical Reserves of Insurance Companies; Superintendent of Banks; www.sib.gob.gt.
Changes during 2006
Imports and import paymentsJuly 1. The CAFTA-DR went into effect.

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