US embassy cable - 04GUATEMALA942

UNCLAS GUATEMALA 000942 
 
SIPDIS 
 
USDOC FOR 5102/FOREIGN TRADE ZONES (ITA/IA) 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, GT 
SUBJECT: GUATEMALAN FREE TRADE ZONES 
 
REF: STATE 72748 
 
Below are Post's responses to questions regarding the Free 
Trade Zones (FTZs) Program in Guatemala.  Answers are keyed 
to match questions in reftel and are based on Decree 65-89, 
Law of Free Trade Zones. Post also consulted experts on 
FTZs issues at the Ministry of Economy and the Customs 
Administration for clarification. 
 
a. According to the Ministry of Economy, there are 20 
authorized FTZs currently, but only 14 with operations. 
FTZs may be established in any region of the country. 
 
b. Private FTZs are managed by private administrative 
agencies, which require authorization from the Ministry of 
Economy to install and develop FTZs. FTZs are provided 
special customs benefits under the supervision of the 
Guatemalan customs authorities. 
 
c. Businesses operating within FTZs require authorization 
from the Ministry of Economy to operate, but the process is 
done only once and not for each manufacturing activity. If 
all the requirements are met, the process of obtaining 
approval from the Ministry may take about three weeks. 
 
d. There are three types of Free Trade Zones' users: 
industrial, commercial and service permit holders. 
Industrial permit holders can assemble or manufacture 
products in the zone for export or re-export, and they can 
use both foreign and domestic inputs. According to the Law 
of Free Trade Zones, industrial permit holders may sell to 
the domestic market a maximum of 20 percent of their total 
production, but require previous authorization from the 
Ministry of Economy. In such cases, the value of each sale 
should not be lower than US$5,000 and should have only one 
consignee in the national customs territory.  Commercial 
permit holders do not transform goods.  They often use FTZs 
for wholesale distribution of imported goods to the five 
economies of the Central American Common Market.  Service 
permit holders are often firms engaged in washing and 
treating fabric and apparel for the apparel maquila 
industry. 
 
e. Industrial permit holders, as well as service permit 
holders, authorized to operate in Free Trade Zones are 
exempted from duties and import taxes on equipment, 
machinery, tools, raw materials, inputs, semi-elaborated 
products, containers, packaging and are exempted from the 
value added tax in the transfer of merchandise within and 
between Free Trade Zones. Manufactured merchandise that 
leaves the zone to be sold in the domestic market must pay 
duties. According to the Customs Administration office 
responsible for FTZs issues, the manufacturer must pay 
duties at the rate that applies to the finished product, 
and duties are paid on the entire value of the product. 
 
f. There are no special provisions for small and medium 
businesses or for new foreign direct investment operating 
within Free Trade Zones. 
 
g. Industrial and service permit holders also enjoy a ten- 
year income tax exemption on income obtained exclusively 
from the activity as an industrial permit holder. 
Commercial permit holders enjoy a five-year income tax 
exemption on income obtained exclusively from the activity. 
 
h. There are no other financial incentives for business 
operating in Free Trade Zones 
 
i. There are no other exemptions contained in other laws or 
regulations. 
 
j. There are no other restrictions or requirements, such as 
export requirements (other than for industrial permit 
holders, as explained above), local content requirements, 
or ownership requirements for businesses operating within 
Free Trade Zones.