Guatemala continues to benefit from low public debt (below 30% of GDP) and manageable fiscal deficits, projected at around 3% of GDP through 2026. Access to external financing remains favorable, supported by investor confidence and stable sovereign ratings. The domestic financial sector is well-capitalized, with non-performing loan ratios remaining low. However, the business environment is challenged by high informality (about 70% of employment), which limits tax collection and constrains credit access for SMEs. While insolvency data is limited, most businesses remain solvent due to conservative lending and strong remittance-driven demand. Nonetheless, any sharp external shock, such as a drop in remittances or a spike in global interest rates, could strain liquidity and increase insolvencies, especially among smaller firms and informal enterprises. Strengthening the domestic capital market and improving legal frameworks for insolvency remain key priorities. 

Guatemala’s strategic location, competitive labor costs and growing nearshoring trends attract investment in manufacturing, agribusiness and services. However, structural bottlenecks persist: weak infrastructure, limited access to skilled labor and a cumbersome regulatory environment hinder broader investment. Corruption, weak rule of law and increasing security concerns weigh on investor sentiment, particularly outside established export sectors. Recent reforms – including the first anti-trust law and increased public investment – signal progress, but implementation gaps remain. To unlock its full potential, Guatemala should accelerate digitalization, improve vocational training and strengthen public institutions. Enhanced transparency, judicial reform and targeted incentives for formalization are essential for fostering a more dynamic and inclusive business climate.

Political risk remains elevated as President Arévalo’s administration faces persistent opposition from entrenched interests and a fragmented Congress. While the 2024 transition was ultimately successful, ongoing legal challenges and sporadic protests, especially among indigenous communities, underscore governance fragility. The government’s reform agenda, focused on anti-corruption, social inclusion and public investment, is ambitious but vulnerable to legislative gridlock and institutional pushback. Voter disillusionment and social tensions may flare if promised improvements in education, health and infrastructure are slow to materialize. Externally, relations with the US, particularly on migration and security, will remain pivotal for stability. General elections are scheduled for August 2027, and the risk of policy reversals, renewed political turbulence and foreign interference in a similar way to what happened in neighboring Honduras cannot be ruled out.