The application of Article 27 of the Emergent Conservation of Employment Act has put on tenterhooks the feasibility of permanence in the country of 125 companies operating in the free zone.
An article on Prensalibre.com reports that "... the Emergent Conservation of Employment Act , in force since March 31, 2016, specifies that 43 activities can not be produced or marketed and developed from free zones, including pharmaceuticals, cosmetics, plastics and machinery, among other things. "
Among the changes to be made to the draft of the Emerging Law for the Conservation of Employment is the limitation of activities developed in free zones.
The bill which aims to uphold a series of incentives for the productive sector, while the Law on Investment and Employment is being analysed in Congress, will undergo a series of amendments at the request of the tax administration and the Ministry of Finance.
While the Investment and Employment Law Project is still waiting in Congress, a new initiative has been proposed to extend the incentive schemes for maquila and free zones for ten years.
The initiative called "Emerging Employment Maintenance Act," was developed in consensus with the business sector, explained Jorge Mendez, Minister of Economy, to Dca.gob.gt.
The Mexican government's proposal to create special economic zones in the south of the country could pose a threat to the attraction of international investment on to Guatemalan soil.
The proposal put forward by the Peña Nieto administration is to create areas that operate under different regimes, providing tax facilities and incentives to foreign companies that decide to settle there.
The Executive argues that foreign companies planning to invest in the country desist from doing so if they are not provided with tax incentives and the possibility of paying differentiated wages.
The Government is continuing to put pressure on Congress to approve the Investment and Employment Act which has been temporarily suspended due to several actions of unconstitutionality presented before the Court.
Although they are "often as dynamic and innovative as formal companies" enterprises in the informal sector say they see no benefit to regulate their situation.
A study by the World Bank concluded that "... 73% of informal firms have no interest in becoming regulated," not only because of tax payments, but simply because they say they receive no benefit from it.
In the view of entrepreneurs, insecurity is still the main factor preventing the arrival of larger flows of foreign direct investment to the region.
Despite the benefits and incentives of all kinds offered by governments to encourage the establishment of foreign companies in Central America, as long as violence and insecurity is not tackled in a more effective manner, investment flows will continue to dwindle.
The Guatemalan Exporters Association is asking Congress to urgently approve vital regulations to ensure better conditions for investment and the creation of more jobs.
From a statement issued by the Guatemalan Exporters Association (Agexport):
Entrepreneurs of the Guatemalan Association of Exporters, AGEXPORT have made an urgent call to Congress, for the adoption of Decree 46-44, on Investment and Employment Law in the shortest time possible due to the pervading uncertainty on the part of dozens of companies about whether or not to remain in the country and the job security for at least 80 thousand jobs, which respond to Guatemala's number one export product, clothing and textiles, as well as other manufactured products.
Companies with under $38 billion in capital will be able to register without paying duty to the Register of Commerce.
The Register of Commerce has also reduced the number of steps needed to open a new business, reducing the time from 17 to 13 days.
"The head of the Register, Rodrigo Valladares, said that the constant changes aim to streamline the business registration processes, providing legal certainty to new entrepreneurs, and for this reason they have extended the options so that people can be made aware of the processes."
The government is defining areas as economic districts in order to attract investment to municipalities outside of the capital.
In order to generate employment outside of the capital, the government has defined as 'economic districts' areas in the municipalities of San Agustín Acasaguastlán and Guastatoya , El Progreso; Estanzuela, Zacapa; and Masagua, Escuintla.
The competitiveness of a company and its product does NOT depend only on taxes but also on the cost of materials, labor and energy, and quality of its management.
Editorial
In an analysis of the issue Reny Marianne Bake notes that "... in the seventies and eighties of the last century ... as good merchants, American car producers and labor unions lobbied their politicians, seeking state protection, not wanting to compete.
In Guatemala, in order to meet WTO requirements, exemptions will be eliminated gradually, and instead economic benefits will be awarded.
The exemptions are to be applied to sectors such as maquila industry, through Law 29-89, and the Free Zones Act.
"In order to meet a requirement of the WTO, the exemptions will be eliminated gradually, but economic benefits will be granted in order to keep the country attractive for investments", said Pavel Centeno, Minister of Finance.
Recognized Brazilian company of backhoe loaders, telescopic, articulated and other types of cranes looking for companies interested in representing the brand and distributing their machinery in Central America and Mexico. The company manufactures and sells telescopic,...