The initiatives of Competition, Leasing and the reforms to the General Law of Telecoms are some of the projects that the new administration of Giammattei plans to present to the Congress of Guatemala.
During his inaugural speech, the new president of Guatemala gave the first guidelines in the economic field, highlighting which projects should be streamlined in the Legislative.
In Panama, a bill is planned to convert the provinces of Los Santos and Herrera into a Special Economic Zone, which will offer tax and labor incentives to companies in the agricultural sector that decide to invest in the area.
Representative Julio Mendoza, of the Democratic Revolutionary Party, announced that in the coming weeks he will present a bill to the Assembly to create the Special Economic Zone of Azuero.
The business sector and executive authorities are working on a proposal for reforms to the Law of Free Zones of Puerto Cortés, a project that aims to expand existing incentives for this regime.
The modifications that will be discussed in next week's mobile congress in San Pedro Sula seek to reform decrees 1, 2, 3, 12, 16 and 22 of the Free Zone Law of Puerto Cortés.
In Guatemala, five private projects to build economic development zones are already in the process of being processed, only two months after the regulation defining the fiscal benefits to develop them came into force.
On February 4, the Law on Special Public Economic Development Zones (ZDEEP) came into effect, which provides for tax benefits consisting of a 10-year exemption from 100% income tax, as well as the temporary suspension of taxes associated with imports, among others.
The regulation for Special Public Economic Development Zones, which came into effect in Guatemala on February 4, establishes fiscal incentives for companies operating under this scheme.
Among the tax benefits provided by the Law on Special Public Economic Development Zones (ZDEEP), include the exemption for 10 years of 100% of income tax, as well as the temporary suspension of taxes associated with imports.
Since the free trade zones law was amended, almost 100 companies have closed in Guatemala in the last two years, and by 2019 the figure is expected to keep growing if the regulatory framework is not modified.
Data from the Bank of Guatemala detail that from January to October of this year, exports of companies in free trade zones totaled $471 million, 2% less than the $479 million registered in the first ten months of 2017.
Two years after having been presented at the Guatemalan Congress, the initiative to reform the Free Zones Law is still awaiting approval.
In 2016, initiative 5174 was presented to the Congress of the Republic, and has been debated in speeches made by deputies and in meetings of the Economic Cabinet of the Executive Power, none of which have resulted in its approval.
In Guatemala, reform of the Free Zones Law has been in place for two years, and as a result, several companies have withdrawn, while others are still waiting for the tax benefits to be restored before making any more investments.
Some companies are keeping their investments on hold, because the tax benefits applied to activities that take place in free zones were eliminated withDecree 19-2016.One such case is that of electric vehicle importer Electricmóvil. This companyis waiting for Congress to reform the Law and restore the benefits, before expanding its operations under this regime.
With the modification of the Free Zones Law, it will now be possible to accumulate up to 25 samples which do not have a commercial value in a single declaration.
Jaime Campos, executive director of the Regulatory Improvement Organization, told Elmundo.sv that the reform "...'will help the investment climate in the country' because the reform introduces the concept of the 'accumulated goods declaration', which will allow imports or exports of up to 25 samples in a single declaration."
The formal closure of 15 companies in free zones has been reported from October 2015 to date and sixty other users have already suspended their operations.
The problems facing the free zone regime have not stopped increasing since the Emergent Law for the Conservation of Employment came into force, which eliminates tax exemptions which used to benefit companies operating under the free zone regime.
It has been reported that one of the 17 free zones operating in the country has started the process of closing its operations entirely due to the legal uncertainty generated by the emergent employment law.
Companies operating in free zones have spent several months denouncing the serious situation they have faced since the Emergent Act for the Conservation of Employment was implemented, instead of encouraging investment and job creation, it has become a good example of how to discourage investment in a country.
The new legislation extends the tax benefits enjoyed at current export processing zones, to free trade zones in other sectors such as logistics, outsourcing and agricultural exports.
The business sector is demanding that the government take action to minimize the impact of the expiry at the end of the year of tax incentives granted to foreign firms in free zones.
About 1,300 companies enjoy the benefits granted by the World Trade Organization, which expire on December 31 this year. Two companies have already moved their operations to other countries, according to the Ministry of Economy of Guatemala.
An initiative from the panamanian private sector seeks to simplify the law, providing investment incentives for a period of not less than 10 years and expediting the approval of operating licenses.
Other proposals covered in this lawreform include the creation of the National Council of Free Zones, the aim of which is to be the sole supervisor of the sector. In addition, in order to improve the competitiveness of the free zones in the country, the private sector and the association of EPZs are seeking to implement measures to better compete with the laws, incentives, accessibility, and legal certainty in other zones in the region.
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