Financial Crime World

Risk Assessment in Finance: Guatemala

Guatemala’s uncertain political and economic outlook, combined with its troubled business environment, pose significant risks to corporate payment behavior. The country’s high corporate default probability reflects its weak institutional framework and limited access to financial information.

Challenges

  • Uncertain political and economic outlook
  • Troubled business environment
  • High corporate default probability due to weak institutional framework and limited access to financial information

Despite these challenges, Guatemala has shown resilience in recent years, driven by public investment plans and remittances from expatriates in the US. However, low tax revenues, poor infrastructure, and rural poverty continue to weigh on the economy.

Strengths

  • Financial support from the US and multilateral lenders
  • Free trade agreements with the US and EU
  • Geographic proximity to the United States and Mexico
  • High potential for tourism, agriculture, mining, hydroelectricity, and geothermal energy

However, Guatemala’s weaknesses are numerous, including:

Weaknesses

  • Low tax revenues
  • Poor infrastructure
  • Rural poverty
  • Informal economy
  • Ethnic divisions
  • Vulnerability to external shocks
  • Reliance on low-value-added industries and expatriate remittances

Despite these challenges, Guatemala’s economic growth is expected to continue, driven by public investment plans and remittances. The country’s budget is healthy, with a small current account deficit expected.

Political Landscape

The political landscape remains fragmented, with President Alejandro Giammattei facing limited ability to act due to political divisions within Congress. Corruption remains a major issue, and the migration debate continues to be contentious.

Conclusion

Guatemala’s risk assessment in finance is challenging, with high corporate default probability and a difficult business environment. However, the country’s strengths and growth prospects suggest that it may be worth considering for investors willing to take on some level of risk.