IFLR 1000
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In addition to being the largest economy in Central America, Guatemala has a legal system that is slightly more sophisticated than those of some of its neighbours. The market is still fairly small, but not altogether rigid....

In addition to being the largest economy in Central America, Guatemala has a legal system that is slightly more sophisticated than those of some of its neighbours. The market is still fairly small, but not altogether rigid. There are Guatemalan financial firms that are very old and considered to be very traditional, firms that have either grown from or become part of regional networks and even a few new entrants to the market in the last decade or so. Almost all of the firms – certainly the larger ones – are located in the historic Central American capital of Guatemala City.

Guatemala's status as the region's largest economy comes at a price. The country has significant personal security issues, organised crime is a big concern, the government suffers from a serious stigma regarding the possibility for corruption, and counterfeiting and money laundering are both prevalent, if not rampant.

Measures have been put in place to try to combat these problems in recent years, however. The Ley de Dominio de Extincion was passed in 2010 to monitor large transactions, foster greater transparency regarding the origin of assets, and otherwise prevent illicit money from changing hands too easily. In February of this year, the Guatemalan Congress approved President Otto Pérez Molina's tax reform package. This package contained several laws intended to bring Guatemala closer to international tax standards while raising much-needed revenue for the government to use in the fight against corruption, counterfeiting, and crime. Whether or not these measures will prove effective will likely take years to assess, but nearly every lawyer feels that recent legislative efforts represent a step in the right direction.

Another point of interest in the legal field is the fact that the number of attorneys in Guatemala has doubled within the last decade, far outpacing both population growth and the growth of the legal market. The number of law schools has risen significantly in recent years as well, which is important for two reasons. First, there is a sense that too many lawyers are graduating from law schools – some of them marginally qualified or almost entirely unqualified to practice law. Some of the new law schools are thought to offer a perfectly legitimate course of legal education, but others are viewed as law-degree "factories" established with little intention other than to generate revenue.

The second issue with the new schools is that in Guatemala, the deans of law schools play a significant role in several judicial and legislative processes. Therefore, as more law schools crop up, there are more deans involved in these governmental procedures. Considering Guatemala's history concerning corruption and influence peddling, the prospect of having an increasing number of people who may or may not have the best of intentions involved in political decisions is not a pleasant one.

None of those concerns mean that there is any shortage of investment or good attorneys in Guatemala, however. Even more than some of its neighbour country's operators, the financial firms in Guatemala all have bilingual attorneys (many are multilingual) and it's becoming nearly a requirement to have studied law, worked for a firm, or received an LLM abroad.

CONTEXT AND TRENDS Money isn't pouring into Guatemala, but it is certainly there. Many of the economic factors that affect the rest of Central America have affected Guatemala over the last few years....

Money isn't pouring into Guatemala, but it is certainly there. Many of the economic factors that affect the rest of Central America have affected Guatemala over the last few years. There is also a sense that the country, due to some security and rule-of-law concerns, has missed out on big investments in areas like mining. The country is a large target for regional investment though and has the economy to support more and bigger industries than its neighbours. If Guatemala can correct some of its problems on the most basic governmental level, the outlook will undoubtedly brighten in short order.

The recent tax reforms have had a big effect on law practices throughout the country. Tax planning and restructuring have become bigger parts of the day-to-day workload at many of them. "The recent amendments that focus on tax law have had an impact in almost every industry," comments one partner. "We've been busier than previous years doing tax work with many different types of clients. The Tax Package will mark our steps for the coming years."

Power generation is an important field as well. Last year the government intended to contract for 800MW of electricity production, but after a confused bidding process, only 250MW were accounted for. There will be another bid this year to make up for the shortfall: "After the first bid, a lot of companies with the capacity to undertake power projects were left out," another attorney notes. "Many of the firms [in Guatemala] have represented or will represent a bidder, because there are still opportunities for both renewable and traditional power-source projects."

Due in part to legislative changes and also to the country's efforts at prosecuting "white-collar" crime, there has been a much larger emphasis on litigation in Guatemala recently. As one lawyer points out, "Our litigation practice has grown in the criminal, civil, commercial and constitutional areas. We've also been doing a lot of IP litigation in counterfeiting and in dismantling warehouses where they produce counterfeit goods."

Many firms are waiting on high precious metals prices to create mining opportunities in the country as they have elsewhere in Central America, but they haven't materialised yet. A partner observes, "The new administration has said they're going to issue a larger number of mining licenses. So far, though, they've been timid and have hardly issued any."

There is also a sense that the rising number of lawyers may have an even bigger impact on the country's legal profession in the near future: "There's a class struggle at law firms," says an attorney. "The people who want greater reforms in Guatemala are usually of the higher class, but the lower class wants to be lawyers, too. It's not a problem of class, but of qualification. Every lawyer in Guatemala is a notary, and they have public faith. Some new lawyers are great, but in other cases we have to spend months untangling a legal mess created by second-rate work that should never have existed."

MAJOR LEGISLATION CHANGES

National Tax Reform Package
In effect as of February 2012