Legal Certainty: What are Investors asking for?

A few weeks before the new magistrates of the Constitutional Court take office in Guatemala, the business sector is asking that the new members of the highest court advocate for a real rule of law and provide legal certainty to investments.

Wednesday, March 3, 2021

In recent years, Guatemala's Constitutional Court (CC) has gained prominence in the country's economic sphere, as its rulings have affected different investments that were already operating locally.

The suspension of mining projects, rulings on the issue of differentiated salaries and suspension of benefits for companies that were affected by the pandemic, are some of the examples of how the highest court of the country has gained prominence.

Currently, the institutions involved are in the process of electing new magistrates, who will take office on April 14. The Constitutional Court is composed of five magistrates who are elected by the Congress of the Republic, the President of the Executive, the Supreme Court of Justice, the Superior University Council of the University of San Carlos (CSU) and the College of Lawyers and Notaries of Guatemala (CANG).

In this scenario of changes in the CC, businessmen ask that the new magistrates advocate for the defense of the law, the construction of a solid rule of law and provide legal certainty to investors.

Juan Felipe Molina Botran, from Grupo Hame, told Prensalibre.com that without an optimal rule of law there will be no space for entrepreneurs, "... in a justice system where criminals have almost certainty of impunity and other times even cover them with erroneous interpretations of human rights protections is imperative to strengthen the rule of law to generate prosperity, without respect for private property there can be no entrepreneurship, no sustainable investment or prosperity can be achieved."

For Luis Miguel Castillo, president of the Board of Directors of CBC, the investment environment may improve as long as the courts are clear, "... when we see foreign direct investment it is estimated that 90% is probably from the same businesses that are in Guatemala, we are the same that are used to the risk and that, but we will hardly bring investment if we have not resolved the issues as they see us from outside, if I come to invest in a mining or hydroelectric company I have no legal certainty after going through the whole process."

According to Luis Andres Gabriel Bouscayrol, of Corporacion Centroamericano de Acero, "... the deputies refuse to give the green light to a public-private partnership project that even has a constitutional order. Congress still does not approve the award, clearly because some have political interests and conflicts of interest, regardless of the approval or there are no contractual commitments and the absence of a real rule of law is evident, this is a disincentive to international participants in investments in the country, a clear message that there is no legal certainty."

On March 2, the Congress of the Republic elected Dina Ochoa as magistrate of the CC. In the case of the election of the CSU and the CANG, the process has been delayed due to legal issues. The president, Alejandro Giammattei, and the Supreme Court of Justice have not yet elected their magistrates.

Check out the "System for monitoring markets and economic situation in Central American countries", elaborated by CentralAmericaData.



More on this topic

Without Legal Certainty Guatemala Will Not Prosper

March 2017

The business sector is questioning the decision made by the Constitutional Court to suspend the operation of two hydroelectric stations and is asking for decisions to be made based on legal criteria, giving priority to the national interest.

From a statement issued by Cacif Guatemala:

El Salvador: Legal Uncertainty Making Business Climate Worse

February 2017

Although emphasis was given to the momentum taken in the fight against corruption in 2016, lack of legal certainty continues to affect conditions for doing business in the country.

From a report on the Legal and Institutional Situation by the Salvadoran Foundation for Economic and Social Development:

Guatemala: Hydroelectrics and Legal Uncertainty

February 2017

The Constitutional Court has upheld suspension of the license for the Oxec I and II hydroelectric stations, for allegedly failing to consult indigenous peoples in the area before starting the projects.

The decision taken by the Constitutional Court (CC) is seen by the private sector as a threat to legal certainty in the country, because of the projects that are at stake and the effect it will have on other investments that may no longer be made in Guatemala if orders continue to be given to suspend mining and energy projects.

Respect for the Rule of Law

July 2013

In El Salvador foreign investors are astonished when they learn that legislators refuse to accept rulings by the Supreme Court of Justice.

An editorial by Álvaro Cruz Rojas, chief editor of Elmundo.com.sv, shows clearly why Direct Foreign Investment, and even national investment, has fallen so much in recent years, precisely when other Latin American countries are enjoying a boom in this area.

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