IFLR 1000
The Guide to the World's Leading Financial Law Firms

Despite its ratification of the Dominican Republic-Central American Free Trade Agreement in 2006, the country's towering political and economic issues remain obstacles to attracting foreign investment. But as North America slowly pulls itself out of recession, Guatemala, which relies on the United States for 40% of its exports, stands to benefit (staples include coffee, sugar, and bananas)....

Despite its ratification of the Dominican Republic-Central American Free Trade Agreement in 2006, the country's towering political and economic issues remain obstacles to attracting foreign investment. But as North America slowly pulls itself out of recession, Guatemala, which relies on the United States for 40% of its exports, stands to benefit (staples include coffee, sugar, and bananas). "We depend heavily on exports to North America," says one attorney. "Coffee prices are up, the recovery has helped."

Of more immediate effect is that Guatemala finds itself in an election year and a favourite has yet to emerge as the IFLR1000 goes to press. "When there is an election year, companies may stop some projects," says one partner.

In an unusual move, the current first lady, Sandra Torres, filed for divorce in order to circumvent Guatemala's constitution, which contained a provision disallowing a president's relatives to run for the executive seat. Yet, despite her obvious political connections and recognised name, she has fallen behind former General Otto Perez Molina, who lost in a run-off to Torres' husband Álvaro Colom Caballeros in the 2007 election. In a country with one of the highest murder rates worldwide, Molina has run on a platform seeking to stem rising violence-a continuing problem that has choked economic venture.

To combat the problem and to confront the ever-increasing presence of Mexican drug cartels, the government passed the Ley de Exticion De Dominio, a sweeping legislative package that will have a tremendous effect on regular business activity. Entering into force in June 2011, the law strengthens the government's ability to seize assets and forbids new businesses from issuing bearer shares (previously issued bearer shares need to be converted to nominative shares by June 2013).

"It is similar to a law enacted in Colombia," explains one attorney. "It enables the executive branch through a summary process to liquidate, seize assets. We see it as a positive."

However, even though the law's main targets are organised crime syndicates and money launderers, some voice concern that it may unduly affect licit business conduct. "I think most of these laws enacted, using crime as an excuse, are specifically designed to be broad," notes one lawyer. "It's a big threat to business people."

Another partner explains that Ley de Exticion will require greater scrutiny of even mundane financial transactions because money can be laundered in an infinite number of ways. For example, money used to acquire other assets must be licit - a simple, yet difficult provision. "You have to be completely sure . . . assets, shares, were illegally or unduly obtained by individuals or companies," he says.