Overview
National Focus
Government Digital Economy/Growth/Transformation Plans or Strategies, e.g., see existing Market Intelligence and CCG Leading Sector articles on Trade.gov (search “Digital Economy”)
The government of Guatemala prepared a “Digital Government Plan 2021-2026” with the primary goal of digitally transforming the country to improve efficiency, transparency, and citizen participation in government matters. The plan is a response to the need for a comprehensive framework for digital transformation, especially because the country has made advances in the digitalization of public services but faces significant challenges such as dependency on paper and resistance to internet use by certain sectors of the population. Regionally, Guatemala lags some of its neighbors in terms of adopting digital technologies and providing online government services. Therefore, this plan includes a roadmap with specific ministerial programs, such as updating e-government programs, simplifying procedures, opening data, and enhancing cybersecurity.
At that same time, the Guatemalan Congress recently launched a strategic plan for digital transformation, with the objective to promote a legislative digital agenda, namely updating or creating new regulations to match global technological advancements and foster public participation in the digital transformation process. The working document advocates for a comprehensive digital governance law involving all branches of government and public institutions, aimed at improving operational efficiency, automating processes, and reducing costs.
Projected Digital Economy Growth (identifiable trends, competitive environment, major players)
E-commerce and the digital economy ecosystem are experiencing significant growth in Guatemala. According to the UN Trade and Development organization (UNCTAD), the country is showing an increase in the adoption of e-commerce, digital payment systems, and technology infrastructure investment. ECDB, the e-commerce data analysis company, by the end of 2024, e-commerce in Guatemala will reach $381 million, with an annual rate of 9.7% until 2028. This growth is expected to create more opportunities in sectors such as fintech, e-commerce, and digital services, potentially boosting the overall economy while addressing challenges like digital inclusion and infrastructure development.
The most identifiable trends are essentially five:
- Growth in Fintech: Even though Guatemala has one of the lowest bank penetration rates in Latin America with only 44% of adult population having bank accounts, consumers are increasingly embracing online financial services which is resulting in an increase in digital banking and in the use of other payment platforms. Currently there are only two companies who offer POS services: Neolink (Visa) and BAC (Visa, Master Card, AMEX).
- E-Commerce Expansion: Rising online shopping, driven by improvements in internet penetration and digital payment solutions.
- Government Digitalization: The executive and judicial branches are working on initiatives to enhance public service delivery through digital platforms.
- Infrastructure Development: There are investment plans to expand internet access, especially in rural areas, to boost overall digital inclusion. As of January 2024, there were 10.99 million internet users in Guatemala and internet penetration stood at 60.3%.
- Cybersecurity Focus: There is a growing awareness and effort to enhance cybersecurity across sectors. Revenue in the cybersecurity market is projected to reach $ 65.3 million in 2024. Cybersecurity is becoming increasingly important, as companies, governments, and individuals continue to be more reliant on IT systems, which are vulnerable to malicious actions. Key U.S. companies in the market include Microsoft, CISCO, FORTINET with others having expressed interest in entering.
Guatemala’s competitive environment in the digital economy is characterized by factors such as telecom dominance by TIGO and CLARO. As the only companies that dominate the market, these two companies are the main drivers of internet and mobile service expansions. Rapid growth in fintech, with Local banks like Banco Industrial and BAC Credomatic are pushing digital banking solutions and contributing to the rapid growth seen in fintech. However, it’s still necessary to highlight the need for continued investment in infrastructure and digital literacy.
The major players in Guatemala’s digital economy include:
- TIGO Guatemala: A leading telecommunications company offering mobile and internet services.
- CLARO Guatemala: Another key telecom provider, competing closely with TIGO in mobile and broadband services.
- Banco Industrial: One of the largest banks, leading in digital banking and fintech innovations.
- Guatecompras: The government’s e-procurement platform which plays a crucial role in digitalizing public services. During the March 2024, during the High-Level Economic Dialogue meeting lead by Under Secretary Jose Fernandez, both governments agreed that this tool must be modernized in order to fulfill its main objective of making government procurement processes transparent and close the corruption gap.
Market Challenges (Desks and I&A/ODSI to assist with review prior to submission):
Regulatory environment
Guatemala’s regulatory framework for the digital economy is underdeveloped, which poses significant challenges for Guatemalans, but most importantly for business society and investors. The country lacks legislation addressing the digital economy’s needs. This creates uncertainty for businesses, limiting growth potential and deterring foreign trade and investment. Moreover, the pace of regulatory development is slow, existing laws are outdated and new initiatives are cumbersome and do not yield results in the short term.
However, in mid-August 2024, Congress launched a new proposal to address the legislative agenda on digital transformation. This new proposal recommends the creation of a Parliamentary Forum on Digital Transformation composed of three phases, in which 14 bills will be reviewed in depth. The forum seeks to promote the digital legislative agenda from the Congress by ensuring the participation of different government sections and sectors of society, to facilitate the exchange of legislative experiences at the international level to adopt successful models and build a new model of governance. It consists of a political roundtable composed of members of Congress and technical roundtables made up of parliamentary support groups from government institutions, academia, think tanks, social and trade organizations, foreign countries, and donors. The meetings will take place throughout 2024 and once an initiative is discussed, it will be presented to the plenary.
Data Privacy
Guatemala does not have a personal data protection law, however the Law on Access to Public Information (Decree 57-2008), does address the matter in certain provisions which can be applicable to private parties. In addition, the Guatemalan Ombudsman has taken an active role and has filed certain key legal actions against entities that process personal data. This has prompted the Constitutional Court to issue several decisions, all following the same rationale in that protection is recognized and granted in favor of data subjects in the context of data processing upon which data subjects have the following rights: informed consent, access, rectification, cancellation, and opposition. In addition, any transfer of personal data (whether local or international) requires the data subject’s express consent written or where digital, in such a manner that can be subsequently retrieved.
However, the lack of a proper law is a critical concern in Guatemala, the absence of stringent data privacy regulations exposes consumers and businesses to risks and undermines consumer trust in digital services. This also hampers Guatemala’s ability to engage in international data flows, limiting its participation in the global digital economy.
AI Regulation
There is no regulatory agency, nor specific legislation for AI in Guatemala. This raises ethical and legal concerns and increases the risk of AI technologies being developed and used in ways that could harm individuals and society. Furthermore, the lack of regulatory guidance stifles innovation, as businesses are uncertain about the legal ramifications of developing and deploying AI technologies.
Cross Border Data Flows
The flow of data across borders is crucial for the digital economy, but Guatemala faces significant challenges in this area. The country’s weak data protection framework limits its ability to engage in cross-border data flows, as many countries impose strict data protection requirements for international data transfers. In addition, the lack of harmonization between Guatemala’s data protection standards and other countries creates barriers to cross-border data flows. This situation is further complicated by the absence of international agreements or partnerships that facilitate the secure and lawful transfer of data across borders. Specifically, International data privacy frameworks such as the Global Cross-Border Privacy Rules system which facilitate secure cross-border data transfers and cooperation on data protection and privacy enforcement, require interested jurisdictions to have a comprehensive data protection law and data protection authority.
Cybersecurity
Cybersecurity is a critical issue for the digital economy, and Guatemala faces significant challenges in this area. The country lacks a comprehensive cybersecurity framework, leaving businesses and consumers vulnerable to cyber threats, including hacking, phishing, and ransomware attacks. The lack of a national cybersecurity strategy and insufficient investment in cybersecurity infrastructure further exacerbate the problem. Businesses, particularly small and medium-sized enterprises (SMEs), often lack the resources and expertise to implement robust cybersecurity measures, making them easy targets for cybercriminals.
A Check Point Research Threat Intelligence Report indicated that in the last six months of 2023, Guatemala suffered 6,316 cyberattacks: 2,635 against companies primarily from the banking and finance sector and 3,681 against Government agencies.
Online Harms Regulation
Regulating online harms, such as cyberbullying, hate speech, and misinformation, is a growing concern in Guatemala. The digital economy’s expansion has brought with it an increase in online harms, but the country’s legal framework is ill-equipped to address these issues. The absence of regulations and enforcement mechanisms to combat online harms undermines efforts to create a safe and secure online environment. This lack of regulation not only affects individuals but also has broader implications for the digital economy, as unchecked online harms can erode trust in digital platforms and services.
Standards Development
The development and adoption of digital standards are essential for the growth of the digital economy, but Guatemala faces challenges in this area. The country lacks a coordinated approach to standards development, resulting in a fragmented market with varying standards across different sectors. The absence of a national body or framework for developing and enforcing digital standards further complicates the situation.
Subnational Market Regulation
Guatemala’s digital economy is also affected by the lack of uniformity in subnational market regulations. Different regions within the country have varying regulations governing digital services, creating a complex and inconsistent regulatory landscape. This regulatory fragmentation poses challenges for businesses operating across multiple regions, as they must navigate different sets of rules and regulations. The lack of harmonization also limits the scalability of digital businesses and creates barriers to market entry for new players.
Market Entry
Market entry is a significant challenge for digital businesses in Guatemala. The country’s complex regulatory environment, coupled with the lack of clear guidelines for digital businesses, creates barriers to entry for both local and foreign companies. Moreover, the high cost of compliance with regulatory requirements, combined with the lack of support for startups and SMEs, further deters new entrants into the digital market. This situation stifles competition and innovation, limiting the growth potential of the digital economy.
Public Sector Procurement
Public sector procurement is a key driver of the digital economy, but Guatemala faces challenges in this area as well. The country’s public procurement processes are often opaque and inefficient, making it difficult for digital businesses to compete for government contracts.
The lack of transparency and the prevalence of corruption in public procurement further exacerbate the problem, as businesses are often unable to compete on a level playing field. This situation limits the opportunities for digital businesses to engage with the public sector and hinders the growth of the digital economy.
Digital Trade Barriers
Guatemala faces a number of digital trade barriers, including:
Data Localization:
Guatemala has not enacted explicit data localization laws, but concerns about data privacy and protection are rising, driven by influences from regional partners. National Trade Export (NTE) report, published by USTR, highlights global trends where data localization measures may be used for state surveillance and interfering with civil liberties, which poses a compliance risk for U.S. businesses operating in Guatemala.
Technology Barriers:
The lack of a cohesive regulatory framework in Guatemala has led to inconsistencies in technology adoption , particularly in telecommunications and digital infrastructure. These barriers are exacerbated by limited government capacity to regulate emerging technologies and ensure equitable access across the country.
Barriers to Internet Servies:
Internet penetration in Guatemala is estimated 60% in 2024, but that percentage drops drastically for in rural areas. Limited competition in the telecommunications sector contributes to this issue, hindering the growth of digital trade. Furthermore, regulatory challenges and the lack of robust cybersecurity measures create an uncertain environment for internet-based services.
Third Country Bias/Influence:
Guatemala’s digital economy is influenced by external players, such as Estonia and some of the non-market economies. While considered a U.S. ally in the tech sector, Estonia is emerging as the ‘gold standard’ for some officials, which may result in lowered attention to U.S. standards and digital trends.
Digital Trade Opportunities:
Despite challenges, Guatemala presents opportunities in the digital trade sector, particularly in e-commerce, fintech, and digital services. As the country gradually improves its digital infrastructure and regulatory environment, U.S. businesses can leverage their technological expertise and innovative solutions to capture a growing market. The NTE report underscores the importance of continued engagement to overcome existing barriers and capitalize on these opportunities.
a. Cross-Sector Enabling Technologies
Digital technologies that enhance productivity, efficiency, and functionality across different industries. Examples (including alignment with CETs): Guatemala presents significant opportunities in cross-sector enabling technologies that enhance productivity and efficiency across various industries.
i. Communications and Networking Technologies: With the increasing demand for reliable internet access, opportunities exist in expanding 5G networks using Open Radio Access Network (ORAN) technologies and sub-sea cables.. These advancements can improve connectivity, essential for the development of smart cities and the broader digital economy.
ii. Advanced Computing: The introduction of high-performance computing solutions would benefit industries such as finance, healthcare, and manufacturing by improving data processing capabilities and enabling more sophisticated analytics.
iii. Advanced and Networked Sensing and Signature Management: These technologies would enhance sectors like agriculture, logistics, and public safety by providing real-time data and monitoring solutions.
iv. Human-Machine Interfaces: These interfaces, including augmented reality (AR) and virtual reality (VR), have the potential to transform sectors such as healthcare, and others by offering immersive experiences and improving user interaction with digital systems.
v. Artificial Intelligence: AI offers significant potential for automation and data-driven decision-making across industries, including finance, healthcare, and customer service. Guatemala’s growing tech ecosystem can leverage AI to improve efficiency and competitiveness.
vi. Other: quantum computing, , information communication technology (ICT), internet access, 5G , sub-sea cables: Quantum computing, ICT infrastructure, and advancements in internet access represent critical areas for investment and development. These technologies can position Guatemala as a hub for innovation in Central America.
b. Specific Industry Sub-sectors: Examples (as relevant to your market)
i. Quantum Technologies: While still in its emerging stages globally, Guatemala could explore in the medium term, partnerships and investments in quantum technologies to foster innovation and attract tech companies looking to experiment with these emerging tools.
ii. Financial Technologies: The fintech sector has most recently demonstrated its capacity for growth, with opportunities for digital payment systems, blockchain technology, and online banking solutions. These technologies can enhance financial inclusion and streamline transactions in both urban and rural areas.
iii. Cybersecurity: As digital adoption increases, so does the need for robust cybersecurity measures. There are opportunities to develop and implement cybersecurity solutions that protect businesses and government agencies from cyber threats. Cyber solutions dominate the market with a projected market volume of $ 38.06 million in 2024. Revenue is expected to show an annual growth rate of 10.91% in 2024-2029.
iv. Internet of Things (IoT) and Smart Cities: Guatemala is projected to witness a significant growth in the IoT market, particularly in the agriculture sector, to enhance productivity and sustainability. By 2024, revenue is estimated to reach $625.90 million ( the United States is projected to generate the highest revenue in the IoT market, with an estimated amount of $342.5 billion in 2024).
v. Software and Digital Services, and Telecommunications: Guatemala has emerged as a compelling hub for software development and can continue to expand by developing customized solutions for local businesses, while the telecommunications sector can grow by improving network infrastructure and service delivery, particularly in underserved areas.
The 4G network coverage in Guatemala is estimated to reach 91.1% in 2024, while the 3G network will stand at 95.13%. The average broadband connection speed in the country is projected to be 26.43 kbit/s. Additionally, internet penetration in Guatemala is expected to reach 60.44%, with approximately 1.16 million households having internet access at home. Regarding the ICT sector, per capita exports are estimated at $41.74, and total consumer spending on ICT equipment is projected to reach $111.30 million.
c. Digital Economy-related trade events.
These are some of the most relevant events that take place in Guatemala:
- Innovation & Technology ExpoCongreso: February, 2024. Organized by the Guatemalan Chamber of Industry, this annual event brings together hundreds of local and international guests to discuss cybersecurity, intelligence, and fintech solutions.
- Guatemala Fintech Day: May, 2024. Organized by the Guatemalan Fintech Association, the event include conferences and meetings to foster dialogue and collaboration between different actors in the financial and corporate ecosystem, with a particular focus on the adoption of financial technologies.
- TechSoup Connect Guatemala Chapter: October 2024. This virtual event is organized by CampusTEC, a technological innovation center that brings together entrepreneurs and companies to promote the development of new technologies, providing access to spaces with the necessary elements to make new ideas a reality.
- EmTech Digital LATAM 2024: October 2024. Organized by the MIT Technology Review magazine in Spanish, this year’s event, which will be held at the Universidad Francisco Marroquín ( UFM) on October 24, focuses on exploring and presenting the latest innovations in technology, with a particular focus on Artificial Intelligence (AI).