Front Cover
 Table of Contents
 Constitution and form of gover...
 Nationality and immigration
 Rights and duties of foreigner...
 Foreign investment
 Commercial companies
 Public instruments and notarial...
 Bankruptcy and insolvency
 Contracts and obligation
 Suretyship and guaranty
 Labor and social legislation
 Mining legislation
 Petroleum legislation
 Agarian legislation
 Forestry and water legislation
 Monopolies and special privile...
 Patents and trademarks
 Negotiable instruments
 Banking legislation
 Economic controls
 Insurance legislation
 Property and property rights
 Mortgages and other liens
 Bailments and commodatum
 Marriage and its dissolution
 The family
 Administraion of justice
 Sanitary legislation
 Nuclear energy
 Territorial waters, continental...
 Economic planning
 Treaties relating to commerce
 The organization of American...

Group Title: statement of the laws of Guatemala in matters affecting business
Title: A Statement of the laws of Guatemala in matters affecting business
Full Citation
Permanent Link: http://ufdc.ufl.edu/UF00076990/00001
 Material Information
Title: A Statement of the laws of Guatemala in matters affecting business
Physical Description: xiii, 274 p. : ; 28 cm.
Language: English
Creator: Gómez Robles, Julio
Publisher: Pan American Union
Place of Publication: Washington, D. C.
Publication Date: 1959
Copyright Date: 1959
Edition: 2d ed., -- rev. and enl.
Subject: Commercial law -- Guatemala   ( lcsh )
Industrial laws and legislation -- Guatemala   ( lcsh )
Aliens -- Guatemala   ( lcsh )
Lawyers -- Handbooks, manuals, etc -- Guatemala   ( lcsh )
Droit commercial -- Guatemala   ( rvm )
Industrie -- Droit -- Guatemala   ( rvm )
Étrangers -- Guatemala   ( rvm )
Avocats -- Guides, manuels, etc -- Guatemala   ( rvm )
Genre: handbook   ( marcgt )
non-fiction   ( marcgt )
Handbooks, manuals, etc   ( lcsh )
Guides, manuels, etc   ( rvm )
Spatial Coverage: Guatemala
 Record Information
Bibliographic ID: UF00076990
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: ltuf - ABC7073
oclc - 03064486
alephbibnum - 000256250
lccn - 59064163

Table of Contents
    Front Cover
        Page i
        Page ii
        Page iii
        Page iv
    Table of Contents
        Page v
        Page vi
        Page vii
        Page viii
        Page ix
        Page x
        Page xi
        Page xii
        Page xiii
        Page xiv
    Constitution and form of government
        Page 1
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
    Nationality and immigration
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
        Page 20
    Rights and duties of foreigners
        Page 21
        Page 22
        Page 23
    Foreign investment
        Page 24
        Page 25
        Page 26
        Page 27
    Commercial companies
        Page 28
        Page 29
        Page 30
        Page 31
        Page 32
        Page 33
        Page 34
        Page 35
        Page 36
        Page 37
        Page 38
        Page 39
    Public instruments and notarial law
        Page 40
        Page 41
    Bankruptcy and insolvency
        Page 42
        Page 43
        Page 44
        Page 45
    Contracts and obligation
        Page 46
        Page 47
        Page 48
        Page 49
        Page 50
        Page 51
        Page 52
        Page 53
        Page 54
        Page 55
        Page 56
        Page 57
        Page 58
        Page 59
        Page 60
    Suretyship and guaranty
        Page 61
        Page 62
        Page 63
        Page 64
        Page 65
        Page 66
        Page 67
        Page 68
        Page 69
        Page 70
        Page 71
        Page 72
        Page 73
        Page 74
        Page 75
        Page 76
        Page 77
        Page 78
        Page 79
        Page 80
        Page 81
        Page 82
    Labor and social legislation
        Page 83
        Page 84
        Page 85
        Page 86
        Page 87
        Page 88
        Page 89
        Page 90
        Page 91
        Page 92
        Page 93
        Page 94
        Page 95
        Page 96
        Page 97
        Page 98
        Page 99
        Page 100
        Page 101
        Page 102
        Page 103
        Page 104
        Page 105
        Page 106
    Mining legislation
        Page 107
        Page 108
        Page 109
        Page 110
        Page 111
    Petroleum legislation
        Page 112
        Page 113
        Page 114
        Page 115
        Page 116
        Page 117
        Page 118
        Page 119
        Page 120
        Page 121
        Page 122
        Page 123
        Page 124
        Page 125
        Page 126
        Page 127
    Agarian legislation
        Page 128
        Page 129
        Page 130
        Page 131
    Forestry and water legislation
        Page 132
    Monopolies and special priviledges
        Page 133
    Patents and trademarks
        Page 134
        Page 135
        Page 136
        Page 137
        Page 138
        Page 139
        Page 140
        Page 141
        Page 142
        Page 143
        Page 144
        Page 145
        Page 146
        Page 147
        Page 148
        Page 149
        Page 150
    Negotiable instruments
        Page 151
        Page 152
        Page 153
        Page 154
        Page 155
        Page 156
    Banking legislation
        Page 157
        Page 158
        Page 159
        Page 160
        Page 161
        Page 162
        Page 163
        Page 164
        Page 165
        Page 166
        Page 167
        Page 168
        Page 169
        Page 170
        Page 171
        Page 172
        Page 173
        Page 174
        Page 175
        Page 176
        Page 177
        Page 178
        Page 179
        Page 180
        Page 181
        Page 182
        Page 183
        Page 184
    Economic controls
        Page 185
        Page 186
        Page 187
        Page 188
        Page 189
        Page 190
        Page 191
    Insurance legislation
        Page 192
        Page 193
        Page 194
        Page 195
        Page 196
        Page 197
    Property and property rights
        Page 198
        Page 199
        Page 200
        Page 201
        Page 202
        Page 203
        Page 204
    Mortgages and other liens
        Page 205
        Page 206
        Page 207
        Page 208
    Bailments and commodatum
        Page 209
        Page 210
        Page 211
        Page 212
        Page 213
        Page 214
        Page 215
        Page 216
        Page 217
    Marriage and its dissolution
        Page 218
        Page 219
        Page 220
        Page 221
        Page 222
        Page 223
        Page 224
        Page 225
        Page 226
        Page 227
        Page 228
        Page 229
        Page 230
    The family
        Page 231
        Page 232
        Page 233
        Page 234
        Page 235
        Page 236
        Page 237
        Page 238
    Administraion of justice
        Page 239
        Page 240
        Page 241
        Page 242
        Page 243
        Page 244
        Page 245
        Page 246
        Page 247
        Page 248
        Page 249
    Sanitary legislation
        Page 250
        Page 251
        Page 252
    Nuclear energy
        Page 253
    Territorial waters, continental shelf, fishing rights
        Page 254
        Page 255
    Economic planning
        Page 256
        Page 257
        Page 258
        Page 259
        Page 260
        Page 261
        Page 262
        Page 263
        Page 264
        Page 265
        Page 266
        Page 267
        Page 268
        Page 269
        Page 270
        Page 271
        Page 272
    Treaties relating to commerce
        Page 273
        Page 274
    The organization of American states
        Page 275
Full Text



In Matters Affecting Business

Se.k i U W *

Iemied ai Elauged

Lawyer of Guatemala City

Pae American Union
General Secretariat of the Orgalization ,of Amegica States

) Copyright, 1959, by
Washington, D.C.

General Legal Division
Department of Legal Affairs

Pan American Union, Washington, D.C.


This is one of the series of studies edited and publishedby the Gen-
eral Legal Division of the Pan American Union, for the purpose of pro-
viding businessmen, lawyers, and other interested persons with a sum-
mary of the basic legislation in force in each Latin American republic c.
Emphasis is given to laws and regulations pertaining to commercial mat-

Needless to say, in a specific undertaking counsel should be con-
sulted since it may be necessary to study the full texts or details of leg-
islation, regulations and court decisions, as well as to ascer tain what
changes may have taken place since publication. The general accuracy
of the text is ensured by the fact that each study is based upon informa-
tion supplied by competent practicing lawyers of the country concerned.

The present volume on Guatemala is a revised edition of one pub-
S lished in 1951, for which a Supplement appeared in 1956. It is based
upon material submitted by the author, with considerable expansion as
to subject matter, which has been translated and edited by Taylor W.
Gannett and reviewed by Leon K. Smith, both of the Division's staff.

' ^The author for Guatemala, Dr. Julio G6mez Robles, is an eminent
S Guatemalan lawyer and economist who has been at times university pro-
fessor, newspaper editor, bank director and chairman of the Social Se-
curity Institute. He has held distinguished positions as member of the
S judiciary, diplomat, government official and delegate tovarious inter-
national conferences, frequently as chief of his delegation.

A Supplement to this work will be issued whenever a sufficient
number of important changes have occurred.

Paul A. Colborn
Chief, General Legal Division

April 1959




A. Fundamental Provisions of the Constitution 1

1. Civil Rights and Constitutional Guarantees 2
2. Protection of Rights (Amparo) 3
3. Labor and Social Provisions 4
4. Property Rights and Expropriation 4
5. Suffrage and Elections 5
6. Finances and Budget 6
7. State of Emergency 8

B. Structure of the State 9

1. Legislative 9
2. Executive 10
3. Judicial 12
4. Regional Government 13
5. Local Government 14


A. Nationality and Citizenship 15

1. Definition of Nationals 15
2. Citizenship 16
3. Loss of Nationality 16

B. Naturalization 17

C. Immigration and Tourists 18

1. Entry Requirements 18
2. Categories of Foreigners 19
3. Tourist Travel 19
4. Expulsion of Foreigners 20
5. Promotion of Immigration 20


1. Civil and Political Rights 21
2. Criminal Legislation 22
3. Property Rights and Restrictions 22
4. Rights to Engage in Commerce and Industry 22


5. Practice of Liberal Professions 23
6. Foreign Workers 23




1. Basic Principles 28
2. General Partnerships 30
3. Corporations 31
4. Limited Partnerships 35
5. Limited Liability Companies 36
6. Joint Ventures 37



1. Notaries Public 40
2. Public Instruments 41


1. Fundamental Provisions 42
2. Effects of a Declaration of Bankruptcy 43
3. Composition with Creditors 43
4. Priority of Credits 44
5. Foreign Bankruptcy 45


A. General Provisions 46

1. Nature and Kind of Contracts and Obligations 46
2. Capacity of Parties 47
3. Proof of Contracts and Obligations 47
4. Remedies 47
5. Distinction between Civil and Commercial Contracts 48

B. Contracts 48

1. Formation of a Contract 48
2. Effects and Performance 48
3. Transfer of Contractual Rights 49

C. Obligations 49

1. Extinction of Obligations 49
2. Rescission, Voidance and Cancellation 51
3. Interpretation of Contracts and Obligations 51




D. Quasi-Contracts

1. General Principles
2. Definitions


A. Civil Sales

1. General Principles
2. Duties and Obligations of Parties
3. Cancellation
4. Warranty
5. Promise of Sale
6. Right to Repurchase
7. Barter or Exchange

B. Commercial Sales

1. Special Forms of Sales
2. Price
3. Loss and Deterioration
4. Delivery


1. Form and Effects
2. Duties and Obligations of Principal and Agent
3. Termination
4. Commercial Agency



A. Maritime Commerce

1. Vessels
2. Chartering
3. Maritime Risks, Average
4. Bottomry
5. Navigation, Ports

B. Land Transportation

C. Air Transportation

1. General Principles
2. Classification
3. Nationality
4. Accidents
5. Documentation


6. Crews 70
7. National Services and Traffic 70
8. International Services 71


A. General Provisions 72

B. Income Taxes 72

1. Tax on Earnings of Lucrative Enterprises 72
2. Tax on Income or Profits Derived from Capital 79

C. Inheritance Taxes 80

D. Other Taxes 81

1. Customs Duties 81
2. Tax on Coffee Exports 81
3. Stamp Taxes 82
4. Property Tax 82
5. Exemptions for Hotel Enterprises 82


A. General Provisions 83

1. Legislation 83
2. Fundamental Principles 83
3. General Principles 84

B. Protection of Workers 84

1. Working Hours 84
2. Holidays and Vacations 85
3. Wages 85
4. Work by Women and Minors 86
5. Health and Safety Regulations 86

C. Labor Contracts 87

1. General Principles 87
2. Individual Contracts 87
3. Collective Contracts 90
4. Internal Regulations 91
5. Suspension of Contracts 91
6. Termination of Contracts 91

D. Labor Unions 92

E. Strikes and Shutdowns 94



1. Strikes 94
2. Shutdowns 95
3. Status of Rights 95

F. Social Security 96

G. Special Regulations for Specific Occupations 101

1. Agricultural and Livestock Workers 101
2. Work in Homes 102
3. Domestic Service 102
4. Transportation Work 102
5. Navigation and Maritime Labor 102
6. Government Workers 103

H. Labor Authorities 103

1. Administrative Control 103
2. Labor Courts 104


1. General Principles 107
2. Exploration 107
3. Exploitation Concessions 108
4. Royalties 111
5. Mining Authorities 111


1. General Principles 112
2. National Reserve Zones 114
3. Surface Reconnaissance 114
4. Exploration 114
5. Exploitation 116
6. Refining 117
7. Transportation 117
8. Supplementary Provisions 118
9. Termination and Penalties 120
10. Benefits 120
11. Taxation 121
12. Supervision of Petroleum Activities 125

1. General Provisions 128
2. Appropriation of Lands 128
3. Leases of Lands 130
4. Public Lands 130
5. Technical and Financial Assistance 130




1. Abolition of Privileges and Exclusive Rights 134
2. Law on Trademarks and Trade Names 135
3. Patents 140


1. Persons Protected 147
2. Works Protected 147
3. Copyright Defined 148
4. Infringement Remedies 149
5. Protection of Foreign Works 150


1. Bills of Exchange 151
2. Promissory Notes 154
3. Checks 154
4. Letters of Credit 155
5. Local Drafts 155
6. Certificates of Deposit 156
7. Conflict of Laws 156


1. Organic Law of the Bank of Guatemala 157
2. The Banking Law 158
3. Banking Organization 161
4. Commercial Banking Operations 165
5. MortgageBanks 166
6. Investment Banks 169
7. Common Provisions for all Banking Operations 171
8. Banco Nacional Agrario 179
9. Banco del Agro 182
10. Interest and Discount Rates 183


A. Exchange Controls 185

1. Currency and Legal Tender 185
2. Gold Parity 186
3. Convertibility 186
4. Emergency System 188

B. Other Economic Controls 190



1. General Provisions 192
2. Types of Insurance 193
3. Maritime Insurance 193
4. Insurance Companies 194
5. Taxes 196
6. Surety Companies 196


1. Classification-of Property 198
2. Ownership 199
3. Transfer of Ownership 199
4. Accession 199
5. Possession 200
6. Usufruct 201
7. Use and Habitation 202
8. Servitudes and Easements 203
9. Leases 204


A. Morgages 205

1. General Provisions 205
2. Legal Effects 206
3. Extinction 206
4. Foreclosure 206

B. Other Liens 207


1. Bailments 209
2. Commodatum 210



A. General Provisions 213

B. Intestate Succession 213

1. General Principles 213
2. Order of Intestate Succession 214

C. Wills 214


D. Executors and Administrators 216

1. Acceptance and Renunciation of Estates 216
2. Executors 217


A. Marriage 218

B. Rights and Duties of Husband and Wife 224

C. Dissolution and Separation 224


1. General Provisions 231
2. Paternity and Filiation 231
3. Parental Authority 232
4. Support 233
5. Adoption 233
6. Guardianship 234


1. General Principles 237
2. Absent Persons 237
3. Presumption of Death 238


1. Judicial Procedure 239
2. Civil and Commercial Jurisdiction 240
3. Arbitration 244
4. Evidence 245
5. Execution of Judgments 246
6. Administrative Procedures 247
7. Limitation of Actions (Prescription) 248


1. Legislation 250
2. Medicines 250
3. Narcotics 251
4. Foodstuffs and Beverages 252





1. General Principles 256
2. Industrial Development Law 256
3. Institute for the Development of Production 260
4. Savings and Loan Banks for Home Buildings 268




. A


A. Fundamental Provisions of the Constitution

The present Constitution of Guatemala is of the "rigid" type, based on the the-
ory of a constituent power exercised by a National Constituent Assembly distinct
from the ordinary Legislative Power; the procedure for amendment is restrictive,
and is governed by Articles 239 to 245 of the Constitution itself.

An amendment must be approved by a vote of two thirds of the total number
of deputies in the Congress; it must be done by a National Constituent Assemblycon-
voked for the purpose; and it may only modify, abolish, add, replace, or increase

Constitutionally, the domain of the Nation comprises the territory, soil, sub-
soil, territorial waters, continental shelf, and air space, and includes the natural
resources and wealth that may be found within any of these. By Article 3 and tran-
sitory Article 1, British Honduras (Belice) is considered to be a part of the national

The present Constitution replaced the one promulgated in March 1945 and took
effect on March 1, 1956. Up to the present it has not been amended, and it is ap-
plicable to all inhabitants of the country, including foreigners. However, transito-
ry Article 6 empowers the Executive to limit the entry into the country of Guatema-
lan communists who left to seek asylum. What is meant by "communists" is not

The Constitution defines Guatemala as an independent Republic with a demo-
cratic and representative system of government, exercised by three independent
branches: Legislative, Executive, and Judicial. The powers and functions of the
branches of the State are regulated by the Constitution, and government officials
are responsible before the law.

The Constitution is divided into twelve Titles: I -- the Nation and the State;
II -- Nationality; III -- (relating to political and electoral rights); IV -- Human
Rights; V -- Legislative Branch; VI -- Executive Branch; VII -- Judicial Branch;
VIII -- Financial Matters; IX -- Court of Accounts and Office of the Comptroller;
X -- Economic System; XI -- Government of the Departments and Municipalities;
XII -- Amendments to the Constitution; and a section containing nine transitory ar-

1. Civil Rights and Constitutional Guarantees

All inhabitants of the Republic, whether nationals or foreigners, enjoy the
same rights and guarantees established by the Constitution. In general terms the
Constitution (Articles 40 to 78) recognizes the same rights as those protected by
other modern democratic constitutions, such as:

Prohibition of servitude; freedom and equality; obligation of the State to pro-
tect life, integrity, health, and safety, and to give special protection to persons
who are physically or mentally weak.

It declares illegal any discrimination for reasons of race, color, sex, reli-
gion, birth, economic or social position, and political opinions.

Persons with an established identity or guarantee cannot be detained for of-
fenses until judgment has been rendered against them.

No one is compelled to comply with orders not based on law, and anyone may
do whatever the law does not prohibit.

No one may be molested because of his lawful acts or for his opinions.

Freedom to enter, remain in, and depart from the country is guaranteed.
Without a judicial order, no one may be compelled to change his residence or domi-

The right of asylum because of political persecution is recognized, and extra-
dition will be refused for political offenses or connected common offenses.

The right of petition is denied to foreigners only in political matters.

The rights of assembly, association, and public manifestation are recognized.

Private correspondence, papers, and books are inviolable without the order
of a judge. Tax control offices may inspect such documents in connection with the
payment of taxes, but they may not reveal the amount or source of a tax, or of prof-
its, losses, costs, or other commercial or bookkeeping data. Illegally seized docu-
ments or violated correspondence may not be used as evidence in court.

The expression of thought without prior censorship is unrestricted. The means
of expression and of dissemination and the machinery and equipment used therefore
may not be seized, shut down, or their work interrupted.

Officials have only the powers that are expressly conferred on them by law,
and action for civil or criminal liability may be taken against them at any time. The
State or other corporate body is subsidiarily liable for such injury.

All persons shall have access to the courts. Foreigners may resort to diplo-
matic intervention only in cases of denial of justice.

The law may not have retroactive effect except in criminal matters when fa-
vorable to the defendant.

Defense of one's person and of one's rights is inviolable, and no one shall be
2 judged by a special tribunal.

Perjury is punishable; but no one may be compelled to testify against himself
in a criminal case or against relatives.

All individual or group "communist action" is punishable.

There shall be no imprisonment for debt.

Within forty-eight hours after detention, every detained person must be in-
terrogated and informed of the grounds for his detention; thereafter he is entitled
to obtain defense counsel. Holding a person incommunicado and the penalty of con-
finamiento (confinement to a certain place with freedom to move about therein, but
under surveillance) are prohibited. Torture of any kind is likewise prohibited.
The use of arms against a detained person by a guard is a punishable offense (Arti-
cle 58).

Minors under fifteen shall not be considered as delinquents but are subjects
to special legislation.

No one may be convicted without first having been summoned, tried, and
found guilty in court.

The death penalty is not applicable to women or minors and may never be im-
posed on the basis of presumptions.

Every summons issued by an authority must indicate the reasons therefore.

Administrative acts, other than diplomatic or military, are public.

The practice of any religion is guaranteed, but religious groups and ministers
of any sect may not participate in politics.

The Constitution also states that the rights enumerated do not exclude others
that derive from the sovereignty of the people, from the democratic and republican
form of government, or from the dignity of man, and that any laws or provisions
that diminish or distort constitutional rights are null ipso jure (Articles 72 and 73).

2. Protection of Rights (Amparo)

Amparo is a remedy having the essential function of maintaining the guaran-
tees and the invulnerability of the principles affirmed in the Constitution. The Cons-
titution itself provides that the remedy of amparo may be applied for by any person.
Its purposes are: a) to maintain or to restore to a person the enjoyment of his cons-
titutional rights and guarantees; b) to declare in concrete cases that an act or a de-
cision of an official is not compulsory due to its unconstitutionality; c) to declare in
concrete cases that a non-legislative provision by Congress is not applicable due to
its unconstitutionality.

Amparo may be applied for as a specific remedy, in the manner determined
by the law of amparo, in the regular courts organized to act against the authority in
question. Such a court may not refuse to admit a petition for the remedy of ampa-
ro, and the interpretation given by the court must always be in its broad sense.
The remedy of habeas corpus as a protection against illegal arrest and torture may
be petitioned by the party in interest or by any other person.

The Law of Amparo, Legislative Decree No. 1539 of May 12, 1928, develops
these principles.

3. Labor and Social Provisions

Although this subject is treated in Chapter XVI, it may be indicated here that
the matter is governed by Articles 112 to 118 of the Constitution, which provide the
following basic principles:

Labor is both a right and a duty; vagrancy is a punishable offense.

The labor laws are protective in character and the State must maintain har-
mony between capital and labor, by creating equitable conditions. These laws are
conciliatory above all.

All labor must be equitably remunerated by the payment of equal wages for
equal work.

A day's work shall comprise eight hours, and a week forty-eight hours; night
work shall comprise six hours a day and thirty-six hours a week; for mixed work-
ing hours, seven hours a day and forty-two hours a week.

There shall be payment for overtime, a remunerated weekly day of rest, paid
vacations; compensation for unjustifiable dismissal, the right to form labor unions,
-to strike, and to shut down.

There is special protection for women and minors; preference for Guatemalan
workers, and the right to a minimum wage.

The State must promote sources for labor, give protection to private enter-
prise, increase credit institutions, and combat unemployment. It should also pro-
mote the construction of low-cost housing and centers for workers.

The rights granted to workers cannot be renounced and cannot be diminished
by law.

The enactment of a Statute for Government Workers is envisioned to regulate
the labor relations of workers for the State, municipalities, and other agencies
maintained by public funds (Articles 119 to 123, Constitution).

4. Property Rights and Expropriation

Property rights are governed by Articles 124 to 132 of the Constitution, and
expropriation is governed by Decree No. 529 of June 9, 1948, the current law on
the subject.

Private ownership of property is fully guaranteed. The Constitution ordains
that a property owner shall be ensured of conditions necessary for the development
and utilization of his property and states that the law shall determine the obligations
of a property owner and such limitations on ownership as are necessary for the con-
version of idle property, the protection of the "family patrimony", and a better uti-
lization of the natural resourceF of the nation.

Entailments and institutions such as "mortmains" are prohibited.

Churches of all faiths are recognized as juridical persons and may acquire
property for religious, charitable, or educational purposes.

Idle lands may be encumbered, or expropriated for allotment in private hold-
ings to meet the needs of agricultural development.

Private property may be expropriated on grounds of collective need, social
benefit, or public interest. In such cases, the property affected shall be appraised
by experts, taking its actual value into account. Compensation must be paid in cash
before expropriation; only in the event of war, public disaster, or serious distur-
bance of the peace may compensation be delayed. The form of compensation for the
expropriation of idle lands is fixed by law (it may be paid in as many as ten yearly
installments, Article 47 of Decree 559, the Agrarian Statute).

Medium-sized agricultural and livestock property shall receive special sup-

The confiscation of property and limitation on ownership for political reasons
is not allowed.

An inventor has exclusive ownership of his work or invention, for a periodnot
to exceed fifteen years under the Law on Patents.

Within an area of fifteen kilometers adjacent to the frontiers and within three
kilometers immediately adjoining the coastal zones, only native Guatemalans and
companies in which 51 percent of the capital is owned by Guatemalans may be land-

Compensation for the establishment of easements in the public interest may
not be demanded except for damages actually caused.

Waters that can be used for collective benefit in an urban water supply, irri-
gation, generation of power, or other similar uses, are regarded as a part of the
patrimony of Guatemalans. Waters belonging to the Nation may not be acquired in
private ownership, unless they are to be devoted to urban household uses. Private
persons are guaranteed the use and appropriation of streams intended for the gen-
eration of motive power, irrigation, household uses, or for agricultural or indus-
trial activities.

If a work to be undertaken by the State is declared to be for public benefit or
economic development, property owners that will be benefited by the increased
value of their real property and who will make use of the work, are required to pay
taxes in proportion to the benefits obtained.

5. Suffrage and Elections

With respect to suffrage and elections the Constitution does not offer absolute
freedom but adopts a philosophy within which parties must operate and citizens must
adjust themselves. The subject is governed by Articles 23 to 39 of the Constitution
and by the Electoral Law, Decree No. 1069 of April 19, 1956.

The organization of political parties advocating democratic principles is un-
restricted. The functioning of communistic entities or those advocating a totalita-
rian ideology is prohibited.

Registered political parties are public institutions. Only registered parties
may present candidates for President of the Republic and for Deputies. Candidates
are entitled to personal immunity. The State may not support any political party.
All citizens have the right to form political parties.

Under Article 15 of the Electoral Law every party must be registered with the
Electoral Tribunal. Parties already registered have the right to oversee election

The exercise of suffrage must be regulated on principles of autonomy and
honesty of the electoral process, with freedom and impartiality on the part of the
authorities. Suffrage is secret and is compulsory for literate persons and optional
for illiterates.

Minorities that can be numerically determined must be given representation
on popularly elected bodies.

Any provisions amending the Electoral Law, enacted after an election has been
called, shall not be applicable to that election.

Elections for President of the Republic must be called by Congress four months
prior to the end of a presidential term (Electoral Law). There must be a period of
at least sixty days between the date of the call and the election of a President; thirty
days for the election of Deputies; and fifteen days for election of municipal officers,
as provided in the Electoral Law.

The agency that exercises jurisdiction over electoral matters and that organ-
izes and controls the electoral process is known as the Electoral Tribunal. It is
autonomous and no appeal may be had from its decisions except by petition for am-
paro. The Tribunal consists of three magistrates, two appointed by Congress and
one by the Executive.

Municipal, departmental, or national elections must be held on a Sunday, and
completed in one day.

Three systems of voting are recognized by the Electoral Law:

a) By absolute majority of votes, for President of the Republic;
b) By a plurality of votes, for deputies and municipal officers;
c) With representation of minorities, for popularly elected bodies, when three
or more places are to be filled.

6. Finances and Budget

These subjects are governed by Articles 205 to 226 of the Constitution. The
revenues of the State are estimated and the expenditures fixed in the General Budget
which is effective for the fiscal year July 1 to June 30. It is a single nationalbudget
and all revenues of the State constitute a common indivisible fund to be used exclu-
sively to meet the expenditures of the public administration.

Every extraordinary expenditure must be decreed by Congress, as an item of
the General Budget, and any bill involving an outlay or expenses by the State must
indicate the source from which the funds are to be obtained.

The Organic Law of the Budget, Accounts, and Treasury of the Nation, De-
cree No. 552 of February 22, 1956 governs the preparation, approval, execution,
and settlement of items of the General Budget of the State and of the budgets of its
autonomous and semi-autonomous institutions. Each year the Executive must set
aside a percentage of the Budget for planned expenditures to meet the needs of mu-

The Organic Law of the Budget provides that the financial administration of
the Nation pertains to the Executive, through the Ministry of Finance and Public
Credit. This Ministry contains the following divisions: the Budget Department, the
Office of the Comptroller General of the Nation, and the National Treasury, but the
Presidency may include such advisory offices on budgetary matters as it deems

The General Budget of the State contains an estimate of the financial resources
and the maximum limit of expenditures that can be made by its agencies during a
fiscal year. It is divided into two parts: Revenues and Expenditures. The Budget
is enacted as a whole by the Congress. The analytic distribution of items in the
Budget is a function of the Executive.

The Budget of Expenditures is divided as follows: I -- Legislative Branch;
II -- Executive Branch; III -- Judicial Branch; IV -- Public Debt; V -- Classes of
Liabilities; VI -- Semi-autonomous enterprises and institutions of the State; VII --
Autonomous Institutions. Section II is subdivided intb General Administration and
Work Programs. For purposes of analytic distribution, items of expenditure are
divided into branches, sections, chapters, divisions, classes and partidas in ac-
cordance with pertinent regulations.

The Budget Department collaborates in the preparation and execution of the
Budget. The Office of the Comptroller General keeps the general accounts of the
Nation. The Office of Comptroller of Accounts audits the execution of the Budget.
The National Treasury, with its Agencies and Revenue Administration, is the only
entity that may collect funds and make payments.

The Tribunal of Accounts is composed of three judges elected by the Congress
and performs independent judicial functions in accounting matters. The Comptrol-
ler of Accounts audits the revenues, expenditures,, and financial interests of the
State, the municipalities, the University, the decentralized state institutions, and
any other entities or persons specified by law that receive funds from the State or
that collect funds from the public. The pertinent organic law is Decree No. 1126
of November 21, 1956.

Economic regimen. The State has an obligation to direct the national economy
in such a way as to achieve a full development and utilization of its natural resour-
ces and manpower, and so that every Guatemalan shall have the means for worthy
and useful existence in the community. For such purposes the State acts through
the Executive, supplementing private initiative and activities whenever necessary
(Articles 212 to 226, Constitution).

The property of the Nation consists of the following: the public domain; the
territorial waters along the coasts; navigable lakes and rivers and their shores;

rivers, streams, and arroyos that form the boundaries of the national territory;
waterfalls and sources of water for industrial uses, and waters not used by private
persons; the patrimonial property of the State and of municipalities; the land mari-
time zone of the Republic; the continental shelf, air space, and stratosphere; the
fiscal and municipal revenues; the subsoil, deposits of minerals and hydrocarbons,
and any other organic or inorganic substances in the subsoil; monuments andarche-
ological remains.

Community lands (ejidos) and municipal lands, and property of collective
groups or communities are entitled to special protection by the State, which super-
vises their exploitation. These lands may be alienated according to provisions of

The State also promotes the organization of cooperatives.

The technical and rational exploitation of hydrocarbons, minerals and other
natural resources is declared to be a matter of public benefit and necessity.

Contracts and concessions for cutting timber must be based on public bids,
and priority must be given to Guatemalans, who may not transfer this right.

Freedom of industry, trade, and labor may be limited only for economic,
fiscal, or social reasons or in the national interest. The Executive may grant ex-
emptions for a period not to exceed ten years to industries and activities that con-
tribute to the development of the country. The Executive may make contracts for
the establishment of public services for periods of time with the right of extension.

Monopolies are prohibited and the State is bound to limit the operations of en-
terprises that absorb or tend to absorb the production of one or more branches of
industry or of a single commercial activity.

7. State of Emergency

The circumstances under which constitutional guarantees may be restricted
are stated in Articles 77 and 78 of the Constitution and governed by the Law on Pub-
lic Order, Decree No. 22 of February 24, 1956.

In the event of invasion of the country, disturbance of the peace, activities
against the security of the State, or public disaster, the full effect of the guarantees
of freedom, movement, assembly, association, inviolability of correspondence, in-
violability of the home, and the carrying of arms may be ended. When such suspen-
sion occurs, it must be so declared by the President of the Republic through a de-
cree issued in Council of Ministers, and the provisions of the Law on Public Order
are applied. For a "state of prevention", this formality is not necessary. The ef-
fects of such a decree may not exceed thirty days, but if the causes persist a new
decree may be issued. During a "state of war" no time limit is necessary.

The Constitution and the Law on Public Order foresee four "states", accord-
ing to the gravity of the reasons that would require greater and more energetic
powers for the Government in confronting the situation: a) a state of prevention;
b) a state of alarm; c) a state of public disaster; and d) a state of siege or of war.

During such states of emergency the only recourses which may be taken against
S the authorities are those of responsibility (to be taken when the emergency is over),

habeas corpus, and of amparo if the authorities restrict guarantees other thanthose
permitted by the Constitution. During a state of siege, the military authorities as-
sume control of the situation.

B. Structure of the State

The structure of the State is outlined in Articles 1 to 4 and 133 to 238 of the
Constitution. Guatemala is defined as a sovereign, free, and independent nation,
organized to guarantee to its inhabitants a respect for human dignity, the enjoyment
of the fundamental rights and freedoms of man, security and justice, the progress
of culture, and the creation of economic conditions that will bring about social well-

Guatemala maintains as its highest aspiration the reestablishment of the Cen-
tral American Union and shall strive to reestablish this Union on a just and popular

1. Legislative

The Congress, composed of Deputies elected on the basis of two for each elec-
toral district, is exclusively invested with the legislative power. Districts with a
population of more than 100, 000 inhabitants elect one additional deputy for each ad-
ditional 50,000 or fraction of over 25,000 inhabitants.

Congress meets on March first each year and its regular sessions last for
three months, but may be extended for one month. Extraordinary sessions may be
convoked by its Permanent Committee or by the Executive, to deal with specific

As a general rule the Congress renders its decisions by an absolute majority
of votes of its members, unless the Constitution designates some special majority.

Deputies enjoy personal immunity, immunity from responsibility for their
parliamentary opinions and proceedings, and the right of a pretrial before Congress
itself in cases of criminal accusations. Deputies must be native Guatemalans.
Their term of office is four years.

The following may not be Deputies: officials or employees of an organ of the
State, contractors for public works or public enterprises paid from public funds,
relatives of the President of the Republic, military persons in active service, and
persons representing or acting as attorneys for companies or individuals operating
public services.

Powers of Congress. The Congress has two main categories of powers:

a. Those listed in Article 144 of the Constitution, which are political and
administrative in scope, such as -- opening and closing its sessions; passing upon
the presidential election results; election of the President of the Republic from the
two candidates who received the highest number, but not an absolute majority of
the votes; acceptance or rejection of the resignation of the President of the Repub-
lic and granting him leave, or filling a vacancy in the office; election of the first

and second "designates to the presidency" (as potential replacements of the Presi-
dent in the event of his temporary or permanent absence).

b. Legislative powers -- enactment or repeal of laws; approval of the Budget
and government accounts, or over-all amendment of the former; the levying of tax-
es; declaration of war and approval of peace terms; decreeing amnesties for polit-
ical offenses and connected common offenses; specifying the fineness, weight, type,
and denomination of the coinage, and the system of weights and measures; contract-
ing, converting, and consolidating the public debt (matters relating to loans must
be authorized by a two-thirds vote).

c. Internal powers -- passing upon the election of its members and approval
of their credentials; acceptance of resignations of members; enactment and enforce-
ment of its internal regulations.

Two of the important functions of the Congress are a) the approval or disap-
proval, before their ratification, of treaties and conventions and international en-
gagements that have been signed by the Executive, by a vote of two thirds of its
members, and b) the approval of contracts signed by the Executive for the establish-
ment of public services.

Enactment of laws. Bills to be enacted into law may be initiated by the Dep-
uties, by the Executive Branch, and by the Supreme Court of Justice. No law may
be contrary to the Constitution.

Every bill admitted, with the exception of a declaration of national emergency,
must be offered for discussion in three different sessions, on different days, and
cannot be voted upon until adequately discussed at the last session.

If a bill is approved it is transmitted to the Executive for promulgation. The
Executive, in Council of Ministers, may exercise the veto, but if the Congress, in
spite of the objections of the Executive, ratifies the bill by a vote of two thirds of
its members, the Executive must promulgate it as law. Approval by the Executive
is not necessary for provisions relating to the internal organization of Congress,
approval of elections, resignations, or resolutions on the pretrial of Deputies.

Permanent Committee. Each year, prior to adjournment, Congress shall
elect a Permanent Committee, consisting of eight Deputies. The President of the
Congress shall be a member and presiding officer. The Committee functions when
Congress is not in session.

The powers of the Committee are: to conclude matters left pending by the
Congress; to convoke extraordinary sessions; and to convoke elections to fill vacan-
cies among the Deputies.

2. Executive

The executive functions of the State are vested in the President of the Repub-
lic, who may act with his Ministers separately or in Council. The President is the
head of the Executive Power.

The term of the President is six years, without extension, and he may not be
reelected. He must be a native-born Guatemalan citizen, over thirty-five years of

age, and a layman. Leaders or chiefs of a coup d'etat or revolution, relatives of
the preceding President, persons who have served as Ministers or in high military
commands within six months prior to the election, the designates to the presidency
and their relatives, cannot be President of the Republic.

In the event of a permanent or temporaryabsence or impediment of the Pres-
ident, he is replaced by the First Designate, or in his absence, by the Second Des-
ignate, until the absence or impediment is terminated.

The chief functions of the President of the Republic are: to provide for the
defense and security of the Nation and to preserve the public order; to comply with
and enforce the laws; to assume the supreme command of all armed forces; to sanc-
tion and promulgate the laws; to dictate provisions necessary in cases of emergency
or public disaster; to appoint and remove the Ministers of State; to fill civil and
military positions; to appoint and remove diplomatic and consular officials; to ad-
minister the public finances; to stimulate new industries; to authorize the establish-
ment or liquidation of banks and credit institutions; to exercise supervision and con-
trol over banks of issue and other credit establishments; to oversee the conserva-
tion of natural resources. Action in behalf of national economic interests must be
undertaken in accordance with provisions of law.

Ministers of State. The Ministers of State conduct the administrative affairs
of the country. Only lay Guatemalan citizens over thirty years of age may be Min-
isters. Ministries of State may not be held by relatives of the President, by con-
tractors for works or enterprises paid for from public funds, manufacturers of al-
coholic beverages, or the representatives or attorneys of companies or persons
operating public services.

Decrees, rulings (acuerdos), and regulations issued by the President mustbe
countersigned by the Minister entrusted with the matters concerned. The Ministers
must submit an annual report of their activities to Congress. Ministers may attend
sessions of Congress and may take part in discussions connected with the affairs of
their Ministry.

Ministers may be interpellated by Congress, which may give them a vote of
lack of confidence, in which case they must resign. If the President in Council of
Ministers supports the interpellated Minister, the resignation is not accepted, un-
less Congress ratifies its lack of confidence by a two-thirds vote.

The Ministers have jurisdiction throughout the country within their respective
spheres and perform permanent functions with authority over the subordinate agen-
cies, offices, officials, and employees of their Ministries.

Under the Law on the Executive Branch, Decree No. 93 of April 25, 1945,
each Minister has the following functions, respectively:

Communications and public works: Construction and maintainance of national
systems of communication by land or water, and the construction and conservation
of airports and all other public works, including the postal, telegraph, telephone,
cable, radio, electric, and official and commercial radio broadcasting services.

National defense: All matters relating to the armed forces.

Public education: Matters pertaining to the training and protection of the
teaching profession and educational functions.

Government: Matters relating to efficient government, the public order, and
religious faiths.

Finance and public credit: Matters relating to the property, revenues, and
public credit of the Nation.

Foreign affairs: Matters pertaining to the representation, protection, honor,
sovereignty, and interests of Guatemala in international life.

Public health and social aid: The hygiene, health and social welfare of the
country, and social protection in all its aspects.

Agriculture: Affairs and technical matters connected with cultivation of the
soil, livestock, aviculture, apiculture, sericulture, fisheries, and animal indus-

Economy: The promotion, development, mobilization and coordinated expan-
sion of the national wealth in all its aspects, including all matters relating to hydro-

Labor and social welfare: Direction, study, and carrying out of all matters
relating to labor and social welfare.

The Public Ministry. The Public Ministry is an institution auxiliary to the
courts and the public administration, entrusted with the following functions: a) to
ict as the solicitor of the Nation; b) to provide provisional representation of absent
persons, minors, and incompetents, as long as they have no legal representative
in accordance with the Civil Code or other laws; c) to intervene in the courts of jus-
tice in all matters in which this is required by law; d) to take any action necessary
to obtain a correct and prompt administration of justice; e) to furnish legal advice
to the administration in all cases where this is requested; f) to intervene in another
cases specified by law.

The head of the Public Ministry is the Attorney General of the Nation (Procu-
rador General de la Naci6n), appointed by Congress. The functions of the Public
Ministry are autonomous, in accordance with its Organic Law, Decree No. 512 of
June 18, 1948.

3. Judicial

The judicial function is vested in the courts of justice, with absolute exclusive
power to judge and to execute judgments. The judicial function is exercised by the
Supreme Court of Justice, the Court of Appeals, the judges of first instance, minor
judges, and by tribunals of ordinary or special jurisdiction established by law.

The administration of justice is obligatory, gratuitous, and independent, and
it is public unless moral or national interests require secrecy. Judicial functions
are carried out according to rules of justice, provisions of law governing the judi-
ciary, and the laws and codes applicable to the matter being judged.

In any instance and during cassation proceedings, the parties can petition for
a declaration of unconstitutionality of a-law in a concrete case.

The President of the Judicial Branch, the Magistrates of the Supreme Court,
and of the Court of Appeals, are elected by Congress. The Supreme Court appoints
the judges of first instance, the justices of peace, and other minor judges.

The Supreme Court has jurisdiction throughout the Republic; judges of first
instance have jurisdiction in their respective departments, while the jurisdictionof
minor judges is local.

Minor judges try matters of inferior amount (menor cuantia) and conduct pre-
liminary questioning in criminal matters. Judges of first instance try civil and
commercial cases, labor cases, and criminal cases, as determined by the Supreme
Court of Justice, and their judgments and decisions may be appealed to the respec-
tive divisions (salas) of the Court of Appeals. Against final decisions, in cases of
alleged violation of procedure or substance of the law, cassation may be interposed
before the Supreme Court of Justice.

The Military Tribunals try crimes and offenses committed by members of the
armed forces or by leaders taking up arms against the public powers. Their juris-
diction is governed by the Military Code.

The Contentious-Administrative Tribunal has jurisdiction over disputes orig-
inating in acts or decisions made by administrative officials in the exercise of their
functions, as well as in disputes over administrative contracts and concessions.
Its.jurisdiction is governed by a special law.

In accordance with a law on the subject, crimes and offenses relating to the
expression of thought are tried by a jury.

The Supreme Court consists of five magistrates appointed by Congress. The
divisions of the Court of Appeals consist of three magistrates.

There is a special jurisdiction over labor matters, exercised by Labor Judges
appointed by the Supreme Court, in first instance, and by the Labor Appeals Divi-
sion (of three magistrates appointed by Congress) in second instance. Collective
disputes are heard by Boards of Conciliation and Arbitration, consisting of a judge
and one representative each of workers and employers, in first instance, and in
second instance by the Labor Appeals Panel. Jurisdiction is regulated by the Labor

In their operation, the courts are governed by the codes and laws relating to
procedure and by the Constitutive Law of the Judicial Branch, Decree No. 1862 of
August 3, 1936. No case shall have more than two instances.

4. Regional Government

For administrative purposes the country is divided into Departments andthese
in turn into municipalities. The law governing the Departments is Decree No. 227
of April 24, 1946.

Departmental government is entrusted to a governor, appointed by the Pres-
ident of the Republic and acting as the representative and delegate of the Executive.
Governors must be native Guatemalans. The position of Governor is civil and is
incompatible with a military command or with the direct or indirect practice of a
profession, industry, or business within the Department concerned.

The powers of the Governors, as delegates of the Executive in their Depart-
ments, are those of the President of the Republic and of Ministers of State and are
governed by the Law on Government and Administration of the Departments.

5. Local Government

In the municipalities the executive functions are exercised by a mayor (alcal-
de) as a representative and delegate of the departmental Governor, and as head of
the administration of municipal property, revenues, and services. They are elect-
ed by popular vote of their community.

Municipal government is autonomous with respect to powers to dispose of
municipal funds, fulfill its own aims, and provide local public services. This auto-
nomy is thus technical in nature and tends to strengthen local economy and admin-
istrative decentralization.

Municipal government is exercised by a corporate body consisting of the may-
or, the syndics (sindicos) and councilors. The number of the latter is determined
by the body itself. Municipal government is governed by the provisions of the Mu-
nicipal Code, Decree 1183 of Congress, of June 28, 1957.

The property, income, and tax revenues of a municipality belong to it exclu-
sively and are entitled to the same guarantees and privileges extended to property
of the State. The imposition of municipal taxes (arbitrios), however, requires ap-
proval by the Executive.

In addition to its own powers in local matters, a municipality has certain other
powers deriving from its character as a delegate of the Executive.

Municipal rulings affecting private persons or autonomous entities may be
contested through contentious-administrative proceedings.


A. Nationality and Citizenship

1. Definition of Nationals

The Constitution designates two classes of Guatemalans: native Guatemalans
and naturalized Guatemalans (Articles 6 to 15). Among native Guatemalans it dis-
tinguishes two categories: the first, based in general terms on the principle of
jus soli (place of birth), with certain modifications; and the second, based on moti-
vations of Central American solidarity.

Native Guatemalans are those born within the territory of the Republic or on
Guatemalan ships or airships, being the children of Guatemalans, or even of for-
eign parents provided that one of the two has a domicile in Guatemala. If the par-
ents are transient foreigners, the children will be Guatemalans if either parent or
the child himself acquires a domicile in Guatemala during the minority of the lat-
ter, or if the latter acquires such domicile as an adult and indicates his intention
to be a Guatemalan.

Children of native Guatemalan parents, born outside the country, are Guate-
malans if they establish a domicile in Guatemala or if they have Guatemalan nation-
ality according to the foreign law of their country of birth or if they have the right
to choose and they elect such nationality.

Children of naturalized parents are Guatemalan if they establish a domicile
in the country and elect Guatemalan nationality, and if according to the law of the
place of birth, they have no foreign nationality or they elect Guatemalan nationality.

Persons born in one of the other four republics that comprised the Federation
of Central America are also considered to be native Guatemalans if they acquire a
domicile in Guatemala and indicate to a competent authority their desire to be Gua-
temalan. In such cases they may preserve their original nationality.

Naturalized Guatemalans include: a) foreigners who obtain a certificate of
naturalization; b) a foreign woman married to a Guatemalan who elects Guatemalan
nationality, or if according to the law of her country she acquires such nationality
due to her marriage; c) a foreign man, married to a Guatemalan woman, with two
or more years of residence, if he elects Guatemalan nationality and provided the
conjugal domicile is in Guatemala; d) Spaniards and Latin Americans by birth,
domiciled in Guatemala, who indicate their intention to become Guatemalans.

In order to acquire Guatemalan nationality, a foreigner must expressly re-
nounce any other nationality and take an oath of loyalty to Guatemala and its institu-

No distinctions are made between the rights of Guatemalans and those of for-
eigners residing in the country, with the exception of the exercise of politicalrights
and holding certain fundamental public offices, as indicated in the Constitution and
statutory laws. Upon entering the country, foreigners are obligated to respect the
authorities, pay taxes, and obey the laws and regulations.

All Guatemalans have the obligations to serve and defend their country, to
obey the Constitution and see that it is obeyed by others, to work for the progress
of the Nation, to contribute to the public expenditures, to obey the laws and regula-
tions, to respect the authorities, and to perform military service.

Neither Guatemalans nor foreigners may claim compensation from the Gov-
ernment for losses or damages to their persons or property caused by armed move-
ments or civil strife.

2. Citizenship

All males over eighteen years of age and females over that age who are able
to read and write are citizens.

The inherent rights of citizenship are to vote and to be elected to office, and
to hold public office. The duties of citizenship are to see that there is freedom of
suffrage and honesty in elections; to see that the principle of non-succession (alter-
nabilidad) in the Presidency is maintained; and to register as a voter in the Electo-
ral Register.

Citizenship may be suspended, lost, and restored. It is suspended by a sen-
tence of imprisonment for an offense for which there is no waiving of a prison term,
by a final conviction in a criminal trial, and by judicial interdiction.

Citizenship is lost by loss of Guatemalan nationality or by voluntarily render-
ing services to a country at war with Guatemala or to allies of such a country, pro-
vided such services imply treason to Guatemala. Citizenship may be restoredwhen
three years have elapsed after recovering Guatemalan nationality, or by govern-
mental order issued according to law (Constitution, Articles 16 to 22).

3. Loss of Nationality

Guatemalan nationality is lost by naturalization in a foreign country other
than in Central America; for naturalized persons, by a residence of three years or
more in a country outside Central America; by refusal of a naturalized person to
acknowledge his Guatemalan status in some public instrument or by voluntary use
of a foreign passport; by cancellation of naturalization.

A naturalized Guatemalan who leaves the country for more than two years
loses this status, unless he obtains permission from the Ministry of Foreign Affairs
to remain abroad for another two-year period. Upon expiration of such a permit,
the naturalized person must remain in Guatemala for at least five years in order to
16 retain his nationality.

A native Guatemalan who has lost his nationality by naturalization in a foreign
country may recover this nationality by establishing a domicile in Guatemala. Like-
wise, anyone who had the right to choose between Guatemalan and a foreign nation-
ality, and who had previously adopted the latter, may recover Guatemalan national-
ity by establishing a domicile in the country and declaring his intentions to be Gua-
temalan. In the dissolution of a marriage, if naturalization in a foreign country
was a consequence of the marriage bond and the interested party declares intention
to recover Guatemalan nationality, or if by divorce Guatemalan nationality was lost
without so requesting, nationality may be recovered by similar declaration.

4. Registers. See Chapter VII, Registers.

B. Naturalization

Naturalization is governed by the Law on Foreigners (Articles 58 to 70). It
may be obtained by express petition or by tacit application. All foreigners may be-
come naturalized in Guatemala, save for those cases excepted by law, but it is an
optional power of the Ministry of Foreign Affairs to accept or refuse applications
made for naturalization.

In order to obtain a certificate of naturalization the applicant must reside in
Guatemala for ten years, five years of which must immediately precede application
without having been absent for a total of more than six months.

Spaniards and Latin Americans require a period of only two years or more
prior to the date of application. Under similar circumstances, naturalization may
be conferred on any foreigner who has rendered distinguished services to the coun-
try or who has contributed to its economic or cultural progress to an extent worthy
of this honor, in the judgment of the Executive.

In all cases the application is submitted to the Governor of the applicant's
department, with evidence of good conduct and of a profession, trade, craft or
other means of livelihood. The application is published in the Diario Oficial, and
the applicant must pass an examination in Spanish and in the civics of Guatemala.

When these requirements have been met, the Ministry of Foreign Affairs will
determine whether the application is to be transmitted to the President of the Re-
public for issuance of an order for naturalization. If the order is issued, natural-
ization is granted by a formal act in which the foreigner renounces any previous na-

Naturalization will not be granted to a foreigner who is a native of a country
at war with Guatemala, to a person who has been convicted of any serious offense,
nor to those regarded by law as undesirable for entry or residence in the country.

Tacit naturalization occurs when a foreigner accepts a public office or func-
tion for which the law requires the status of Guatemalan nationality.

The effects of naturalization extend only to the applicant. Wives and children
must make separate applications. Minor children, upon attaining majority, may
choose between their nationality of origin or Guatemalan naturalization.

C. Immigration and Tourists

Immigration matters are governed basically by the Law on Foreigners (Ley
de Extranjeria), Decree 1781 of January 25, 1936. Foreigners may enter the coun-
try, reside therein, and freely establish themselves at any place within the national
territory, but the Executive may refuse entry to any foreigner who for reasons of
social interest, internal security, public health, or for any other well-founded mo-
tive, is considered undesirable as a demoralizing or unsuitable element in the main-
tenance of public order.

1. Entry Requirements

In accordance with Article 10 of the Law on Foreigners, entry is prohibited
for foreigners who are members of the Mongolian or Negro races; gypsies; fugi-
tives from justice and persons convicted of infamous crimes; prostitutes and per-
sons engaged in "white slavery"; drug addicts and persons engaged in the traffic of
narcotics; persons expelled from other countries for engaging in totalitarian prop-
aganda, or who do so while already in the country, and persons advocating anti-
democratic ideas; persons who customarily engage in smuggling or in fraudulent
or unlawful trade. Also prohibited entry are idiots, the blind, the insane, epilep-
tics, chronic alcoholics, deaf-mutes, invalids and any others who because of their
physical condition might become a charge on society or the State; persons who at-
tempt to enter the country with false documents. Temporary undesirables include
persons afflicted with an infectious or contagious disease; nationals of a country at
war with Guatemala while the conflict endures; persons excluded temporarily by
virtue of emergency laws.

There are restrictions on the entry of persons in the following categories:

a. Any foreigner over fifteen years of age who is not in possession of cash
funds, to be shown at the port of entry or frontier, amounting to at least one hun-
dred quetzales or its equivalent, plus the necessary funds for the journey to the
place where he intends to take up residence. Exception is made of the minor chil-
dren, or spouse, accompanied by the parents or husband, and persons entering as
political refugees.

b. Persons who are coming to seek employment or to engage in remunerated
activities, unless they have obtained permission from the Executive.

c. Theatrical, circus, and other travelling artists, unless they come under
a contract with some company, institution, or responsible person established in
Guatemala, who must previously guarantee their repatriation.

d. Foreigners over sixty years of age, unless they are Central Americans
or the ascendants of a family established or to be established in Guatemala, or un-
less they have a capital of not less than Q. 5,000.

e. Individuals of Turkish, Syrian, Lebanese, Arabian, Greek, Palestinian,
Armenian, Egyptian, Afghan, Hindu, or Iranian origin or peoples native to the
North African coast. In order to enter the country, such persons must make prior
application to the Ministry of Foreign Affairs and show that they are included inone
of the following categories: a) the spouse of a person established in the country,

or an ascendant or descendant of a person of the same origin established in the
country, if the latter can show they are in a satisfactory position to support them;
b) those who previously resided in the country and can show that they have an es-
tablished business therein. Persons included in these categories, to be admitted to
the country, must deposit Q 200, returnable if the person leaves the country within
one year.

2. Categories of Foreigners

According to law, foreigners in Guatemala are classified into three catego-

a. Domiciled foreigners, resident in the country.

b. Transients, those whose stay does not exceed six months extendablee for
a similar period) and who applied for such status at a Guatemalan consulate. This
category also included those who enter with a special permit to remain more than
two months.

c. Immigrants, which includes any foreigner (laborer, industrialist, artisan,
farmer, or teacher) who, after submitting evidence of good conduct and skills, en-
ters the country to remain. These are divided into three classes: those coming
without contracts to seek their own employment in the country; those under contract
with an enterprise or individual; those contracted by the Government.

3. Tourist Travel

The Law on Travel (Ley de Turismo), Decree No. 861 of November 29, 1951,
declares the tourist trade to be a matter of national interest. The tourist industry
includes all matters which by their nature or services contribute to the attraction
of tourists to Guatemala.

A tourist is defined as a foreigner who enters the country in a transient status
exclusively for purposes of recreation and a knowledge of the country and who,
therefore, does not engage in any lucrative or remunerative activity during his stay,
and does not intend to take up residence.

A tourist is entitled to remain in the country for a period up to six months,
which may be extended for a like period. If the tourist desires to visit any neigh-
boring country, the Ministry of Foreign Affairs will issue a special permit for de-
parture and reentry for a period not to exceed thirty days.

A tourist may enter the country with a card identifying him as a tourist, is-
sued by diplomatic or consular representatives of Guatemala. The fee for this card
is two quetzales, but under a convention between the governments of Guatemala and
the United States signed June 3, 1956 a tourist card may be issued by a travelagen-
cy merely upon proper identification. A birth certificate or similar documentary
proof of citizenship is required. It is also necessary to obtain a smallpox vaccina-
tion certificate.

A National Tourist Office, attached to the Ministry of Economy, has been
established for the purpose of promoting and increasing tourist travel to Guatema-
la. There are no taxes on touring.

4. Expulsion of Foreigners

The government may order the departure from Guatemala of foreigners who
abuse political asylum, or who seek to change Guatemalan institutions or in any way
to disturb public tranquillity or the peace of a friendly nation.

Any non-domiciled foreigner whose conduct endangers public tranquillity or
who has been prosecuted or convicted in some other country for crimes or offenses
for which he can be extradited may be compelled by the Government to reside in
some specified place or even to leave the country.

A foreigner who is untruthful with respect to his name or other qualifications
or who submits false documents may be compelled to leave the country. Any for-
eigner who participates in the commission of offenses against the Public Treasury
will be expelled after fulfilling sentence.

The Executive has exclusive power to order any foreigner to leave the country,
without exception, regardless of the grounds and without stating the reason, if the
presence of such person is deemed disadvantageous to the country. Expulsion pro-
cedure in all cases is purely administrative.

5. Promotion of Immigration

Aside from special provisions mentioned in Chapter XIX, Agrarian Legisla-
tion, there are no special laws relating to the promotion of immigration.


1. Civil and Political Rights

In general terms, under the Constitution foreigners enjoy the same civil rights
and have the same obligations as Guatemalans. Foreigners do not have political
rights but the constitutional rights and guarantees that protect basic human rights
apply to all inhabitants of the country without discrimination of any kind.

No inhabitant of Guatemala, foreigner or national, can be excused from the
fulfillment of obligations contracted within the country.

Transient foreigners and tourists are not entitled to engage in lucrative or re-
munerative activities, which are permitted only to domiciled foreigners.

Under Article 14 of the Constitution foreigners are bound to pay taxes and to
respect the authorities (and acquire the right to be protected by them) from the time
of their entry into the country.

The intervention of a foreign government, directly or through its diplomatic
or consular representatives, in behalf of its nationals, is admissible and expedient
only in case of denial of justice or willful delay in its administration, after all nor-
mal remedies provided by law have been exhausted without result. It is understood
that an unfavorable decision per se does not constitute denial of justice.

In addition to physical persons, the concept of foreigner applies to juridical
persons that owe the recognition of their legal capacity to states other than Guate-
mala. Companies or societies legally organized in a foreign country may be estab-
lished in the country or have agencies therein, with the prior authorization of the
Executive, and they are required to have a branch or agency and a legal represent-
ative if they have a regular business in the country.

The property system in effect between foreign spouses, if there is no mar-
riage agreement, is governed by the law that is common to them at the time the
marriage is performed, and if they are of different nationalities, by the law of the
first conjugal domicile.

Foreigners are not entitled to the benefit of the asilo de familiar (see chapter
XXXI, Trusts). Any person basing his rights on foreign laws must prove their ex-

2. Criminal Legislation

Any foreigner who commits an offense in Guatemala, or on the high seas or
in the free air space on board a Guatemalan vessel or airplane, is subject to the
jurisdiction of Guatemalan courts and laws. A foreigner who commits an offense
on board a foreign merchant vessel or airplane stopping at a Guatemalan port or
within the territorial waters or air space is also subject to the Guatemalan courts
and laws, unless the offense was committed by a crew member against another
member of the crew. In the latter case, Guatemalan authorities may intervene if
the tranquillity of the port or of the State is endangered by the offense.

The courts and laws of Guatemala apply to foreigners whose extradition is
ordered, or who are apprehended in Guatemala, who have committed an offense
against the country's independence, the integrity of its territory, its form of gov-
ernment, its institutions, its peace and security, or against the Chief of State, or
are guilty of other serious offenses.

The courts and laws of the Republic have jurisdiction over foreigners who have
committed serious offenses against Guatemalans in a foreign country, such as ar-
son, patricide, murder, etc., provided that a petition is entered by the Public Min-
istry and the guilty party takes up residence in Guatemala.

3. Property Rights and Restrictions

Under Article 127 of the Constitution, foreigners and Guatemalans not born in
Guatemalan territory, as well as companies in which at least 51 percent of the cap-
ital is not held by Guatemalans, may not own or possess real property within a strip
fifteen kilometers in width along the land frontiers or a strip three kilometers in
width along the coastlines. This restriction does not apply to rights recordedprior
to the promulgation of the Constitution, but such owners may not transfer ownership
except to native-born Guatemalans.

Property located in Guatemala is subject to Guatemalan laws, even if the own-
er is a foreigner. In matters relating to succession, to take effect in Guatemala,
the interested party must petition the Guatemalan court having jurisdiction to sum-
mon all persons who, by Guatemalan laws, may be prejudiced by the adjudication.

4. Rights to Engage in Commerce and Industry

Foreigners residing in Guatemala may engage in commerce and industry with
the same rights and obligations as pertain to Guatemalans, by Decrees 1813 and 1823,
with the exception of restrictions on the establishment of new enterprises or busi-
nesses imposed by these decrees on persons of Asiatic, Turkish, Syrian, Lebanese,
Arab, Greek, Palestinian, Armenian, Egyptian, Afghan, Hindu, Iranian and North
African origin. These restrictions are not readily maintained, however, in the light
of Article 42 of the Constitution, which states that any discrimination on the basis
of race, color, or birth is illegal.

Under equal circumstances, the law grants preference to Guatemalan over
foreign bidders with respect to contracts and concessions for felling timber. In ac-
cordance with Decree No. 419 of September 30, 1955 nationals of any of the coun-
tries of Central America and any foreigner married to a Guatemalan woman or

having parental authority over Guatemalan children may engage in any lawful activ-
ity, including commerce, provided they apply for appropriate authority from the
Ministry of Economy and Labor.

5. Practice of Liberal Professions

Foreigners may not practice professions for which a university degree is re-
quired, unless the degree has been revalidated by the San Carlos University in Gua-
temala, as prescribed by Decree of July 16, 1954. The Executive may authorize
a foreigner to hold a directive position on the teaching staff of a higher school other
than a university and also to practice a profession not covered by a university fac-
ulty in Guatemala, if the foreigner's background and work indicate an obvious ad-
vantage to the country.

A foreigner may not act as a notary public.

Guatemala is a party to the Convention on the Practice of Learned Professions,
signed at Mexico City in 1902. Other parties are Bolivia, Costa Rica, Chile, El
Salvador, Honduras, Nicaragua, and Peru.

6. Foreign Workers

Only native Guatemalans may participate in matters relating to union organ-
ization of workers. An exception is made in cases of technical assistance to the
Government and with respect to provisions of international treaties or inter-union
conventions authorized by the Executive.

Employers are required to give preference to Guatemalan over foreign work-
ers in filling new positions or vacancies. Ninety percent of the workers in an enter-
prise must be Guatemalans and at least eighty-five percent of the wages paid by an
enterprise must go to Guatemalans. On grounds specified by law, the Executive
Organ may decrease these percentages or may increase them to the point of elimi-
nating foreign workers (Article 13, Labor Code).

In cases of authorized and controlled immigration, the Executive maymodify
the percentage, specifying the scope and duration of such modification.



There is no special law in Guatemala concerning the investment of foreign
capital, nor are there restrictions on such investment. Moreover, although equal
treatment is the general rule under the Constitution, there are a number of conces-
sions for exploiting public resources or services that greatly favor foreign invest-

The Industrial Development Law, Decree No. 459 of November 21, 1947,pub-
lished in Diario de Centro America, December 11, 1947, contains certain rules
favorable to Guatemalan enterprises and capital, solely for purposes of promoting
the establishment and development of industries that will facilitate a more effective
utilization of the resources of the country and which offer possibilities of profitably
disposing of their products in domestic and foreign markets. But this does not ex-
clude the participation of foreign capital.

To be entitled to the benefits of the Industrial Development Law, an enter-
prise that processes, fabricates, or manufactures products intended chiefly to meet
the needs of the domestic market, and which does not require great technique for its
operations, must be organized predominantly with Guatemalan capital. On the con-
trary, those that do require considerable technique for proper development must
have only a minimum of 33 percent Guatemalan capital, and if this is not available
at the time the enterprise when organized with foreign capital must maintain the 33
percent mentioned available for sale at any time.

An enterprise whose products are intended for export must have at least 15
percent domestic capital in order to be entitled to the benefits of the Industrial De-
velopment Law. An enterprise intending to manufacture alcoholic or fermented
beverages, whether utilizing the benefits of the Law or not, must be organized with
at least 70 percent Guatemalan capital.

Within the meaning of the law, Guatemalan capital is defined as capital be-
longing to individual Guatemalan persons, or individuals who, although not Guate-
malan, have their principal business in or customarily reside in Guatemala, or
Guatemalan juridical persons in which a minimum of 70 percent of capital is held
by Guatemalans.

Enterprises that were already organized at the time the Development Law was
enacted are not required to change the form in which their capital is organized, but
in order to be entitled to the benefits of the Law, those enterprises that do not re-
quire a high technique and intend their products for export, must allow a participa-
tion of 50 percent Guatemalan capital. Those enterprises that do require hightech-
nique and produce for domestic consumption must allow a participation of at least
33 percent Guatemalan capital.

Foreign companies or societies, in order to operate in the country, require
authorization from the Executive Organ and must pay an annual fee for such author-
Sation, ranging between 300 and 500 quetzales. In order, however, that profit-
aking stock-issuing companies shall not be subject to double taxation, this annual
authorization fee will be counted in computing payment of the tax on profits.

Foreign banks may operate in the country through legally established branches.
Authorization for the establishment of a branch or agency is given by the Executive
Organ, upon favorable recommendation of the Monetary Board.


1. Definition (Articles 4-5, Commercial Code)

The Commercial Code regards as a merchant any person who, having the le-
gal capacity to make contracts, engages in commercial trade as his customary and
regular occupation; but in addition, a person who on occasion performs some com-
mercial transactions is likewise subject to commercial legislation with respect

2. Commercial Acts (Articles 1-2)

The Commercial Code defines commercial matters, as any matter in which
there is participation for purposes of profit, such as: a) the purchase or exchange
of exportable fruits, articles, goods, and merchandise, made with the object of
gain by the purchaser or exchanger; b) the purchase, sale, or movement of live-
stock; c) bills of exchange, letters of credit, promissory notes, drafts, and other
banking operations resulting from a commercial contract, even if the drawers, en-
dorsers, acceptors, or holders are not merchants; d) negotiations which result di-
rectly from a commercial business or which relate immediately thereto, as the
chartering of a vessel, vehicle, or animals for transportation, insurance contracts,
sureties, or collateral pledges for commercial liabilities, etc. In order for atrans-
action to be considered commercial, it must relate to movable (personal) property.

3. Capacity (Articles 7-15)

Legal capacity to engage in commerce is acquired at the age of eighteen. Ex-
cept as mentioned elsewhere, foreigners have the same rights as Guatemalans to
engage in commerce. There is no restriction against married women, but theywill
not be regarded as merchants if not engaged in a business separate from the hus-
band. If a married woman engages in commerce and has signed a marriage agree-
ment (capitulaciones) she is liable only with her own property and not the commu-
nity property of the marriage.

4. Control of Commercial Activities

The registration and control of industrial, commercial, and urban and inter-
departmental transportation enterprises is a function of the Ministry of Economy.

Other than this administrative control, fiscal controls, and public health reg-
ulations covering drugs, narcotics and foodstuffs, there are no others. There is
26 full freedom of enterprise.

5. Bookkeeping Requirements (Articles 16-59)

Every merchant must keep the accounts of his business in Spanish, in the
national currency, and by the double-entry system of bookkeeping, using the follow-
ing principal ledgers: inventory, cash, daily journal, main ledger, balances, and
any others deemed necessary. Merchants engaged in the daily sale of goods must
keep a special sales ledger, and all merchants must keep a ledger showing the en-
try and outgo of merchandise.

Books must be kept at the place where an enterprise has its domicile. Keep-
ing more than one set of books for the same business is prohibited. Bookkeeping
by modern technical systems is permitted.

Account books constitute full proof in all cases against allegation to the con-
trary by the merchant whose records they are, and the accounts of a contesting
party serve as proof against anyone required to keep books but who fails to do so.


1. Basic Principles

Commercial companies in Guatemala are governed by the Commercial Code
(Articles 279 to 456) enacted as Decree No. 2946 of September 15, 1942.

The Code recognizes four types of companies, as follows:

General partnership (sociedad colectiva) Articles 372 to 383;
Corporation (sociedad an6nima) Articles 384 to 418;
Limited partnership (sociedad en comandita) Articles 419 to 444;
Special limited liability company (sociedad especial de responsabilidad limi-
tada) Articles 445 to 451.

The joint venture (contrato de participaci6n) is also recognized (Articles 452
to 456).

Existence of a company can be proved solely by the duly recorded public in-
strument of organization. In addition to the usual requirements of a valid instru-
ment, this document must contain the following information:

a) Type and purpose of the company, with a statement of the business in which
it is to engage;
b) Firm name (raz6n social);
c) Name of the company, if any;
d) Domicile of the company;
e) Amount of capital and the portion contributed by each partner (member),
whether in money, in any other form of property, or in personal industry;
the value assigned to it or the manner in which such value can be deter-
f) According to the form of company, the person or persons designated to
administer it, and their powers;
g) Share in the profits or losses assigned to each partner, and the date and
manner of distribution thereof;
h) Duration of the company;
i) Grounds on which the company may be dissolved before the date of its ex-
j) Dates fixed for submission of reports, inventory, balance statements and
the distribution of earnings;
k) Basis for liquidation and distribution of assets;
1) What constitutes a majority in matters on which the partners are entitled
to vote;
m) Amount that may be withdrawn periodically by each partner for personal
expenses, according to the type of company;

n) Whether or not disputes between partners must be submitted to arbitration,
and if so, the manner in which the arbitrator is appointed;
o) Any other agreements made by the partners and which the law may specif-
ically require according to the nature and purpose of the company.

Any clauses in the contract of organization which stipulate that certain part-
ners shall not share in the profits or that any part of the capital shall be free from
liability and risk are null and void; but partners may validly agree to different pro-
portions in payment of the assets upon liquidation.

Any change in or extension of the contract of organization, change in partners
due to retirement or death, alteration in the firm name, or in general, any amend-
ment, amplification or modification must be done by public instrument, according
to prescribed formalities.

The instrument of organization must be recorded within eight days in the Re-
gistro de Personas Juridicas, kept by the Civil Register in each departmental cap-

Formation of a company is made public by notice in the Diario Oficial and in
one other widely circulated newspaper, at the expense of the interested parties.
This notice must be published three times within one month and must state:

a) Date and place of execution of the instrument and name of the notary who
b) Name, nature, firm name, domicile, purpose, capital and duration of the
c) Name of the manager or managers, if any;
d) Names of all partners, if it is a general partnership or limited liability
e) Date of recordation in the Registro de Personas Juridicas.

Before a company may act as a juridical person it must also have fulfilled
these requirements: a) at least 25 percent of the subscribed capital must be paid in
(,or the entire capital if it is a limited liability company); b) governmental authoriza-
tion must be obtained if it is a stock-issuing company for profit or in other cases
prescribed by law.

In every form of company the obligations are guaranteed by the company prop-
erty, and if this is not sufficient, by the personal property of the partners (except
in stock companies).

Under Article 302, limited partnerships, corporations, and limited liability
companies are required to set up a reserve fund, the minimum amount of which shall
be fixed in the contract or statutes of the company. At least five percent of the prof-
its for each fiscal period are to be devoted to this fund. This reserve fund may not
be distributed in any way to partners except at the time of liquidation of the company.

Partners. Articles 308 to 333 of the Commercial Code deal in detail with
partners (or members) and their rights and obligations, as generally applicable in
all forms of companies.

Management. Articles 334 to 347 cover the subject of management or admin-
istration and the rights and duties of persons designated for this function.

Dissolution and liquidation. Article 348 lists the following grounds for the
termination of a company:

a) Conclusion of the period agreed upon as its duration, if this has not pre-
viously been extended;
b) Termination of the undertaking, business or purpose for which it was es-
tablished or if its accomplishment has been impossible;
c) Loss of more than fifty percent of the capital;
d) Bankruptcy of the company;
e) On any other grounds specified by law or in the contract.

Upon termination of a company, it is liquidated in the manner and by the per-
sons specified in the contract, statutes, or special agreement. If there is no stip-
ulation concerning appointment of a liquidator and there is no agreement among the
partners, the appointment shall be made by a competent court.

A liquidator is an agent and as such is subject to the rules of agency; if ap-
pointed by a court and any partner so requests, he shall be required to post satis-
factory bond. If there are several liquidators, they must act jointly and they have
joint and several liability. Disputes among them are to be settled by decision of the
partners or by a competent court.

The period of liquidation may not exceed one year; and if not completed in
such time any partner or creditor may request a competent court to fix a reason-
able period for its completion. If the delay is the fault of the liquidators they are
to be removed, without waiver of any liability they may have incurred. Upon ter-
mination of a company, its juridical personality persists, but only for purposes of
liquidation and it is represented by the liquidators in all legal actions. When a li-
quidation is begun, the words "en liquidaci6n" are added to the firm name, and it is
made public by means of notices to be published three times in the Diario Oficial
and one other newspaper. Questions arising over the statement of accounts of the
manager or liquidator shall be submitted to commercial arbitration.

In the liquidation of a company, payments are made in the following order:
a) expenses of liquidation; b) debts of the company; c) contributions of the partners;
d) profits. If the property of the company is not sufficient to cover debts, the rules
concerning receivership and bankruptcy are followed. A partner may not demand
reimbursement of his capital prior to the liquidation of a company, unless it consists
merely of the usufruct from property paid into the common fund. Claims of credi-
tors against partners, claims of partners and creditors against the liquidator, and
claims of one partner against another expire three years after the date of termina-
tion of the liquidation, unless the law specifies a shorter period for a particular ob-
ligation or right. Claims of creditors against a company expire at the time limit
indicated in ordinary law for such claims.

2. General Partnerships (sociedad colectiva)

In a general partnership the liability of the partners is joint and several and
unlimited with respect to third parties, any agreement to the contrary being invalid;
and it is joint and proportional to each contribution with respect to each other.

The firm name must contain the full name of one or more of the partners with
addition of the words "y compafila" and the initials S.C. for "sociedad colectiva".

he name of any partner who has left the firm should be removed from the firm
ame, or if retained the word "sucesores" should be added. The firm name may
used only by the partner or partners given this right by public instrument. If
here is no such designation, all partners may use it. As long as it is recorded in
he Registro de Personas Jurfdicas, an identical name may not be so registered.
any person from outside the company who allows his name to be included in the
irm name becomes jointly liable with the general partners with respect to third
parties, but he has the right to claims against the partners, as a third party.

The personal creditor of a partner may not attach the capital contributed to a
company by such partner, except in special cases, but he may attach the profits this
debtor partner is to receive upon their distribution. Likewise, personal creditors
1)f partners may not unite with creditors of the company in bankruptcy but they may
enter claims against the share in the residue of the assets which the debtor partner
may receive.

No partner in a company may engage in the same kind of business as that of
the company except with the unanimous consent of the other partners. If this prohi-
bition is violated, the profits obtained shall become property of the company without
prejudice to any other appropriate penalties.

S A unanimous vote of the partners is required in the following circumstances:
a) voluntary dissolution of the company prior to expiration of the stipulated period
of duration; b) merger of the company with another company; c) any change in the
instrument of organization of the company.

In addition to the reasons specified by law, a general partnership terminates:
a) upon the death of one of the partners, unless there is agreement to the contrary;
b) by bankruptcy of one of the general partners; c) by judicial interdiction of one of
the partners or for any other reason which deprives him of the management of his
al'airs; d) by the death, disability or legal incapacity of any industrial partner, un-
less he is replaced by another.

3. Corporations (sociedad an6nima)

A corporation is formed by the uniting of capital supplied by shareholders,
liable only to the extent of their respective shares, and it constitutes a juridicalper-
son managed by revocable agents. It is designated by the purpose of the undertaking.
The words "sociedad an6nima" or the abbreviation "S. A. must be added to the name.

In addition to the data required for all forms of companies in the instrument
of organization, that of a corporation must also contain the following information:

a) Names, domicile, etc., of the founders;
S b) Clear and complete description of the purpose of the undertaking or busi-
ness for which it is designated;
c) Capital of the company; the number, value and classes of shares intowhich
S it is divided; priorities in the payment of dividends and amortization of the
different series of shares, if any; premiums to be paid in case of redemp-
tion and the manner and period of time in which the members are to contri-
bute their portion of the capital;
d) The amount of capital subscribed at the time of organization and the portion
* that has actually been paid in;

e) The form of management, powers of the managers, manner of appointing
them and the powers pertaining to the shareholders' meeting;
f) Dates on which regular meetings of the shareholders are to be held;
g) The time fixed for taking inventory, balances, statements, and granting
h) The portion of the profits to be devoted to the reserve fund;
i) What percent of loss of the capital shall cause dissolution of the company
prior to the time stipulated; this may in no case exceed the legal limit

Upon completion of required formalities the members draw up and approve the
statutes. Corporations may act only upon authorization by the Executive, and re-
main subject to the supervision of the Currency and Banking Department of the Min-
istry of Finance.

This authorization must be obtained by application to that Department accom-
panied by the following documents: a) evidence that the instrument of organization
is duly recorded in the Registro de Personas Jurldicas and a certified copy of the
approved statutes; b) an authentic document attesting to the amount of capital ac-
cording to the statutes or instrument of organization; c) full information as to the
domicile of the company and the names and other identification of the director or
manager and of the members of the board of directors.

The Executive will refuse authorization if examination of the contract of organ-
ization shows insufficient capital paid in or subscribed or if it is out of proportion
to the size of the enterprise, or if its terms do not offer the shareholders guarantees
of good management, adequate means of supervising the managers and the right to
know the use to which the funds are put. The statutes of a corporation must guar-
antee all shareholders the right to vote in proportion to the capital their shares re-

After the statutes are approved and governmental authorization obtained, a
corporation must be recorded in the Register of the Currency and Banking Depart-
ment (Registro del Departamento Monetario y Bancario) of the Ministry of Finance,
in accordance with the Law on Registration and Taxation of Lucrative Share-issuing

Founder members who directly or indirectly take part in the administration
of a company which has not complied with all necessary requirements to act as a
juridical person shall be jointly and severally and unlimitedly liable for obligations
contracted with third parties.

The capital may not be increased or decreased and the number of shares into
which it is divided may not be changed except by a decision of the General Board
especially called for that purpose by shareholders representing at least three fifths
of the paid-in capital.

Any decision to reduce the capital must be made known to creditors and the
public by notice published three times in a month in the Diario Oficial and one other
large newspaper, in order that any objection may be raised to the appropriate Min-
istry. In the absence of a valid objection, the Executive shall grant approval un-
less the public interest or the rights of shareholders appear to be compromised.

If the founder members have not subscribed to all the capital, the remaining
shares necessary to complete the required legal percentage must be subscribed
prior to obtaining governmental authorization.

Subscription forms must be in duplicate and contain the following information:
a) a summary of the instrument of organization giving the date and place of execu-
tion, name of the company, and the officiating notary; b) name, occupation, and
domicile of the founders; c) number and series of subscribed shares, their par val-
e, and the acceptance of the subscriber as to form of payment; d) rights and obliga-
ions of the founder members and subscribers in case the Executive does not author-
ize operation of the company in accordance with the terms of the instrument of or-

Stock certificates must contain the following: serial and registry number;
ame of the issuing company; amount of the capital; par value of the share; the name
f the officiating notary, and date and place of execution of the instrument of organ-
zation; date of authorization; date and place of issuance of the certificate; signature
f the manager or administrator of the company and of any other persons indicated
n the statutes; any other special requirements.

Industrial shares may also be issued, if authorized in the instrument, to in-
dustrial members who render services to the company in accordance with Article
313 of the Commercial Code. These shares give the holder only the right to re-
teive dividends, in the same proportion as for capital shares or as otherwise agreed
upon. Industrial shares are nominative (registered as to name) and non-transfer-
able and become void by the death, disability or any other reason by which the hold-
er can no longer perform services, unless there is agreement to the contrary.

Capital shares may be issued as nominative or to bearer. Until their value
is fully paid in, only provisional nominative shares may be issued to be exchanged
for permanent shares when the value is paid in full.

S Nominative shares are transferable by endorsement of the holder duly record-
ed in the stock register. Bearer shares are transferable by mere delivery. In or-
Ser to vote at a meeting the transferee of a nominative share must be recordedprior
to such meeting.

S Transfer of a provisional share renders both the new and former holders
jointly and severally liable for full payment of the share.

A unanimous vote of the members is required to change the value or classifi-
cation of shares. An increase of capital by means of issuing new shares or a de-
crease requires, as mentioned above, a special meeting at which at least three
fifths of the paid-in capital is represented.

Managers of a corporation may or may not be shareholders and they are tobe
chosen at a shareholders' meeting or other method provided in the statutes. Any
clause intended to establish the irremovability of a manager is null and void.

The extent of the powers and liabilities of managers and administrators are
governed by the terms of the instrument of organization and by the statutes; or if
ese are silent, by the general provisions on management of companies and the
les of agency.

Before governmental authorization is obtained, the only acts of management
that may be performed are those connected with preparatory work or transactions
necessary for the organization of the company, and these alone shall be binding on
the members.

At ordinary meetings of shareholders the managers must present a report of
the work accomplished by the company and its current status, an inventory of prop-
erty, a general balance statement for the period and the proposed distribution of

The distribution of dividends may be decided solely by the shareholders' meet-
ing. Dividends may be granted only from actual net profits. No dividends may be
distributed before setting aside the percentage specified in the statutes for the re-
serve fund. If the accumulated reserve fund is insufficient to cover a deficit, all
profits shall be applied to that purpose.

Loss of fifty percent of the capital, or less, if the statutes so indicate, shall
be made known by the management in a signed statement. Active operations of the
corporation shall be suspended and a general shareholders' meeting shall be called
immediately. Managers shall otherwise be personally and jointly and severally li-
able for subsequent actions.

Managers may likewise call a special shareholders' meeting whenever neces-
sary or if a specified number of shareholders so desire. Special meetings may
deal only with matters for which they were called.

Regular meetings shall be held periodically, at least once every six months,
to examine the position of the company, to revoke or confirm appointments of man-
agers and to exercise other powers conferred by the statutes.

Foreign corporations. Corporations legally organized in a foreign country
may become established in the country or open branches or agencies, by authoriza-
tion of the Executive. For this purpose proof must be submitted of organization and
authorization in accordance with the laws of the country of domicile and that such
organization and purpose are not contrary to the laws of Guatemala.

After obtaining such authorization and prior to registration in the Register of
Juridical Persons, a foreign corporation or company must be recorded in the reg-
ister of the Department of Currency and Banking of the Ministry of Finance, as for
domestic corporations. Agents of foreign companies who contract business in the
country without obtaining governmental authorization shall be personally liable for
the fulfillment of any contract made and any consequent liability, without prejudice
to any further legal action against the company.

Corporation taxes. The instrument of organization (the articles of incorpora-
tion) requires a stamp tax amounting to 4 per mil, under Decree No. 1831 of 1932.
There is also a "beneficencia" or charity tax levied on a progressive scale begin-
ning at 5 percent of the first 500 quetzals in excess of 500 quetzals of net income,
up to 43 percent of net income over 300, 000 quetzals.

There is a tax of one percent on the face value of transferred shares. For-
eign corporations are also subject to a yearly tax determined by the Executive which
is not less than 300 nor more than 500 quetzals.

4. Limited Partnerships (sociedad en comandita)

Such a partnership is formed by general and limited partners, the former
alone taking part in representation and management of the company. They are ei-
ther simple or share-issuing limited partnerships.

In addition to the general requirements listed in Article 281 of the Commer-
c tal Code, the instrument of organization must contain the following information:

a) Names of the general partners and of founding limited partners;
b) The amount of capital and portion contributed by each partner; if in shares,
the numbers, value and series of each share;
c) The portion of the capital paid in, and the manner and time in which the
limited partners must pay the remainder;
d) Dates for holding regular meetings of the partners.

The general partners have unlimited and joint and several liability toward
third parties; limited partners are liable only for the amount contributed or sub-
.scribed to the capital.

The firm name must contain the names of one or more general partners, with
the additional words "y compafifa, Sociedad en Comandita (or initials S. en C.)".
The .ords "y compaffia" do not imply inclusion of the names of the limited or "si-
lent" partners. A limited partner (comanditario) who allows the inclusion of his
name in the firm name becomes jointly and severally liable with the general part-

A limited partnership may be terminated for the same reasons as all compa-
unes in general and in addition, by the death, bankruptcy or other incompetency of
the managing general partner. If there are several general partners, the company
may continue under the management of those remaining, if so stipulated, in which
case the firm name shall be altered if necessary.

Simple limited partnerships. A limited partner may not contribute his capac-
ity, credit or personal industry as capital, but this does not apply to a patent, trade
secret or the like, provided no personal use is made thereof.

The capital is supplied entirely by one or more limited partners or one or
more general partners. A limited partner may not perform any act of management,
even as legal representative of the general partners. If he violates this prohibition,
he becomes jointly and severally liable with the general partners.

The following are not considered acts of management: a) attendance and voting
at meetings of partners; b) inspection, examination and supervision of the accounts
and acts of management if this does not interfere with the conduct of business; c)
making contracts with the company; d) individual or collective acts performed dur-
ing liquidation of the company.

Unless there is other stipulation, the decisions and liabilities of the general
partners are governed by the provisions covering general partnerships.

Stock-issuing limited partnerships. Articles 386, 387, 388 and 390 of the
Commercial Code, concerning corporations, are also applicable to this form of
company where pertinent.

The capital is divided into shares which must be fully subscribed and paid for
up to the legal minimum before the company becomes organized. Authorization by
the Executive is not obtained until the capital is subscribed in full and each share-
holder has paid at least one third of his share. This may be attested in a statement
by the manager accompanied by the documentation required for stock-issuing com-

Establishment of a supervisory board (comisi6n de vigilancia), composed of
removable limited partners and appointed by the shareholders' meeting, is compul-
sory. Their number is determined at this meeting. This board must determine
whether the company is legally organized; it must inspect the accounts, verify the
assets, and submit a report at the close of each fiscal period.

If a company begins to operate with the approval of the supervisory board but
without having fulfilled all legal requirements, the members of the board shall be
jointly and severally liable in the same manner as general partners in any transac-
tions. They are also liable if they have knowingly permitted errors in the inventory
which may be detrimental to the company or if they permit an unjustifiable distribu-
tion of dividends.

If a company is annulled due to violation of rules governing organization, the
members of the board shall be jointly and severally liable with the managers for all
transactions executed subsequent to their appointment.

A supervisory board may appoint experts to assist in the inspection of accounts;
they may also call a special meeting of the partners whenever they may deem this
step necessary.

5. Limited Liability Companies (sociedad especial de responsabilidad limitada)

In a limited liability company the number of partners may not exceed twenty
and the liability of each is limited to his contribution to the capital or any additional
amount agreed to in the contract of organization.

Organization of the company may not be completed until it is shown in bona
fide form that the capital has been fully paid in. If organized without this formality,
the contract shall be null and void and the partners shall be unlimitedly and jointly
and severally liable for any loss or damages incurred by a third party. A limited
liability company organized in a foreign country will not be permitted to operate in
Guatemala unless it is shown that it has complied with this requirement.

An appraised value of any contribution made in property other thanmoney shall
be included in the instrument of organization. If the amount stated is greater than
actual value, through fraud or willful intent, the partners shall be jointly and sev-
erally liable for any loss or damage.

The firm name must be in the same form as for a general partnership with
the additional word "Limitada" (Ltd.). If this word is lacking the company is con-
sidered to be a general partnership.

In this form of company an industrial partner is not liable for losses even
when they exceed the capital, unless there is stipulation to the contrary.

The provisions covering general partnerships also govern the limited liability
company whenever they are not contrary to the nature of such a company.

6. Joint Ventures (negocios en participacion)

In a joint venture contract two or more persons assume an interest in one or
more specified business transactions which must be undertaken by only one among
them in his own name, with the obligations of rendering an accounting thereof to the
participants sharing the profits or losses with them in some agreed proportion.

A joint venture is not subject to the requirements provided for the organiza-
tion of companies, but must be established by a public instrument in order to deter-
mine the purpose, interest and other conditions of the agreement.

A joint venture is not a juridical person and has no firm name, collective as-
sets, or domicile and hence is not recorded in the Register of Juridical Persons.

The active partner is the only person regarded as owner of the business in
relations with others that produce the joint participation. Third parties may take
action only against the active partner, and for the same reason the inactive partici-
pants may take no action against third parties.


1. Commercial Registers

There are no general or specific registers for commerce, as distinct from
the Civil Registers. However, every merchant must obtain a license from the Di-
recci6n General de Industrias y Comercio, in the Ministry of Economy.

There is a Register of Juridical Persons kept by the office of the Civil Regis-
ter in the capital city of each Department, in which are recorded the legal copies
(testimonios) of the instrument of organization of companies, such registration to
be made within eight days after organization. Stock-issuing companies organized
for profit must be recorded in a special office, the Contraloria General de las Em-
presas Lucrativas, under the Ministry of Finance.

2. Civil Register

The Civil Register records births, recognition of children, marriages, mar-
riage agreements (capitulaciones), separations and divorces; guardianships, quasi-
guardianships (protutelas) and the custody of children; domiciled foreigners and nat-
uralized persons; and deaths. It records all facts relating to the civil status of per-
sons, as required by Articles 296 to 367 of the Civil Code.

All births within the territory of Guatemala must be recorded in the CivilReg-
ister, in accordance with Articles 299 to 311 of the Civil Code.

All Guatemalans and foreigners residing within a municipal district must be
recorded in the Register of Residents (Registro de Vecindad) of that district and re-
ceive an identity card (cedula de vecindad).

All citizens must be inscribed in the Electoral Register (Registro Electoral)
for which a citizenship card (cedula de ciudadania) is issued.

Foreigners domiciled in Guatemala and naturalized Guatemalans must alsobe
recorded in the Civil Register, in accordance with Articles 330 and 331 of the Civil
Code, and in the Ministry of Foreign Affairs.

The head of the Civil Register at Guatemala City must be a native-born Gua-
temalan lawyer; in other towns the Register is entrusted to special officials or to
the municipal secretary, provided they are native Guatemalans.

3. General Archives of Notarial Records

This Register is in charge of a Director General, who must be a practicing
notary public, and in it are filed and classified special copies (testimonios) issued
by notaries as well as their records (protocolos) of all instruments authorized by
them. The Director General of Protocols also keeps a Register of Powers of Attor-
Sney and their amendments, in strict chronological order. This Register is govern-
ed by Articles 78 to 89 of the Notarial Code of November 30, 1946.

4. Property Register

The Property Register is a public institution maintained for the purpose of
registering, annotating, cancelling, and making public all acts and contracts relat-
ing to ownership of property and other real rights. This is governed by Articles
1076 to 1192 of the Civil Code.

Although every contract may be valid between the parties concerned, it only
prejudices a third party if recorded in this Register; the term third party covers
anyone who did not participate in the act or contract.

Agrarian chattel mortgages (prenda agraria), and matters relating to rail-
roads, streetcars, canals, docks, and other works that involve real rights over the
lands that they occupy must be recorded in the Property Register, in specific books
kept for these purposes.

5. Other Registers

Patents and trademarks. Inventions, trademarks, commercial names, and
commercial advertising are recorded in the Office of Trademarks and Patents (Ofi-
cina de Marcas y Patentes) in the Ministry of Economy (Governmental Decree No.
882 of December 31, 1924).

Register of foreigners. A Register of resident foreigners is kept in the Min-
istry of Foreign Affairs (Articles 45 to 52, Law on Foreigners).

S Local registers. Each municipality maintains a register (Registro de Vecin-
,dad) of all adult nationals and foreigners residing within its jurisdiction (Article 18,
Municipal Code).

Electoral register. The Electoral Register is a record of all citizens, with
a notation of all circumstances relating to the exercise of their political rights (Ar-
ticles q to 12, Electoral Law, Decree 1069 of April 19, 1956).

Petroleum register. All persons, nationals and foreigners, who are engaged
in the exploration, exploitation, processing, transportation, exportation, importa-
Stion, and distribution of petroleum and petroleum products must be recorded in the
SPetroleum Registers, kept by the General Administration of Mines and Hydrocar-
bons (Di recci6n General de Mineras e Hidrocarburos). Such registration shall in-
Sclude the establishment, modification, transfer, encumbrance, limitations, ter-
mination and cancellation of petroleum rights and any other circumstances thatmay
Require registration according to regulations (Articles 30 to 36, Petroleum Code).


1. Notaries Public

All matters relating to notarial services are governed by the Notarial Code
(C6digo de Notariado) enacted as Legislative Decree 314 of November 30, 1946. A
notary not only practices a profession that requires a degree awarded by the Univer-
sity of San Carlos but it is also a public function which can be held only by a native-
born Guatemalan.

A notary authorizes the acts and contracts in which he officiates and records
them in his official record, his protocolo. This protocolo is a collection in chron-
ological order of the original instruments, the recording of acts, and the attesting
of legalization of signatures and documents recorded by the notary, according to
law. The protocolo is kept on specially-made stamped paper, strictly numbered
and controlled by the General Revenues Administration (Direcci6n General de Ren-

The numbered instruments in strict order of dates are issued by the notary
on this special paper, in numerical order without blanks and without space between
one another. An instrument is issued in accordance with the following specified
legal requirements which determine its validity as a public instrument: serialnum-
ber, place, day, month, and year of issuance; acknowledgment of acquaintance with
or identification of the parties to the instrument; acknowledgment of having seen
documents referred to in the instrument; the text of the act or contract; the signa-
tures of the parties and of the notary.

For wills, donations causa mortis, instruments of organization of companies,
and agrarian pledges certain additional requirements must be included as a better

A notary is required to issue a simple legalized copy or testimonio to the
parties to an instrument, their heirs or assigns, or to any person who requests it.
If he refuses, he may be compelled to do so by court action.

The records of notaries are subject to inspection by the Director of the Gen-
eral Archives of Notarial Records (Archivo General de Protocolos).

Consuls of Guatemala in foreign countries are also notaries and may author-
ize public instruments. Consuls, in all cases relating to documents that are to
have effect in Guatemala, may legalize the signatures of appropriate officials of
the country in which they are accredited. In addition, notaries may officiate in the
issuance of documents not recorded in their protocolo, with due attestation of the
40 facts or circumstances of each case.

2. Public Instruments

Only an instrument recorded in the records of a notary public is a public in-
strument. Any instrument not recorded in the protocolo of a notary, even if it
bears signatures of the parties legalized or acknowledged by a notary, is a private
instrument. Its nature is not changed by the fact that it may subsequently be re-
corded by the notary at the request of the parties; it nevertheless remains a private
instrument. A public instrument per se or a private instrument signed before or
acknowledged by a notary is a document that has full force as evidence in court.

Any contract conveying real property with a value in excess of 500 quetzales
($500) must be consigned to a public instrument. This is a formality of proof, since
acts which do not fulfill this requirement are still compulsory in their binding ef-
fects and can be proved by admission of the obligated party.

Wills and instruments of organization of companies must also be in the form
of public instruments or they are null and void.


1. Fundamental Provisions

Definition. Bankruptcy is the condition of a merchant who ceases the current
payment of his obligations. It embraces all the property and debts of the bankrupt,
and is regulated by Articles 1320-1367, Commercial Code, and by Articles 663 to
725 of the Code of Civil and Commercial Procedure. The bankruptcy of a general
or simple limited partnership includes the personal bankruptcy of the partners; but
the bankruptcy of any one partner does not render the company bankrupt.

Classes of bankruptcy. A bankruptcy may be fortuitous, culpable, or fraud-
ulent. A bankruptcy is fortuitous when it is due to casual and unavoidable misfor-
tunes in the regular and prudent order of good administration which reduce the cap-
ital to the point of suspension of payments.

A bankruptcy is culpable when: a) the personal and household expenses of the
bankrupt have been excessive; b) the bankrupt has lost large sums of money in any
form of gambling, betting, or fictitious exchange operations; c) the bankrupt, with
the intention of delaying bankruptcy, has purchased goods to be sold at less than the
current price; has borrowed money, put securities in circulation, or used other un-
profitable means of securing funds; d) after suspension of payments, he has paid one
creditor to the prejudice of another; e) it is shown that in the period elapsed since
the last inventory until the declaration of bankruptcy there was a period in which the
bankrupt directly owed twice the net assets shown by the inventory.

In addition, unless there is proof to the contrary, a bankruptcy is considered
culpable: a) if the bankrupt failed to keep books or did not keep them with due reg-
ularity; b) if he had granted sureties or contracted excessive obligations for the ac-
count of another without requiring guarantees of equivalent value; if he hadpurchased
goods on account and sold them at less than the current price; c) if, after suspen-
sion of payment of his obligations, he failed to give appropriate notice to the com-
petent judge; d) if declared bankrupt a second time, without having fulfilled the ob-
ligations of a previous agreement; e) if when required to appear in person, the bank-
rupt absents himself before or at the time of the declaration of bankruptcy or dur-
ing bankruptcy proceedings.

A bankruptcy is considered fraudulent in the following cases: a) if the bank-
rupt has concealed money, goods, credits, or other property; b) if the bankrupt,
before or after the declaration of bankruptcy, has purchased for himself, through
third parties, real property, goods, or credits, or has assigned commercial as-
sets without receiving value therefore; c) if there has been a simulated alienation of
any kind; d) if the account books do not show the existence or withdrawal of money or
42 property that came into his possession subsequent to the preparation of the last

inventory; e) if he absents himself or flees leaving his books, documents, or apart
ol his assets concealed; f) if he simulates, exaggerates, or recognizes expenses,
losses, or debts; g) if he conceals, alters, or mutilates his account books; h) if he
has applied to his business funds or property held in deposit or for administration;
i) if he concealed from his principal the alienation of goods or property; j) if in
prejudice to hts creditors, he has paid debts that fell due subsequent to the declara-
tion of bankruptcy; k) if he withdraws assets from the bankrupt mass, to his own
benefit, after the bankruptcy; 1) if he admits being a debtor in an instrument, with-
out stating the cause of the debt; m) in general, any time a bankrupt executes a
transaction that decreases his assets or increases his liabilities in a fraudulent

Punishment (Penal Code, Articles 408 to 410). Fraudulent bankruptcy, so
declared by a judge, is punishable by six years' correctional imprisonment. A
merc hant declared in culpable insolvency is punishable by two years' correctional
rrmprisonment. Fortuitous bankruptcy has only civil effects.

2. Efiects of a Declaration of Bankruptcy

From the hour in which a declaration of bankruptcy is issued, the bankrupt is
ih.eret,, separated from the administration of all his property, which passes to the
recei.ers (sirndicos) as representatives of the creditors.

A judicial declaration of bankruptcy irrevocably fixes the rights of the credi-
ror, in the status in which they were before the declaration. A bankruptcy produces
effects only if declared by a court, and from the date fixed by the judge.

F rom the moment a judge declares a person in a state of forced composition,
all credits thereby fall due and interest in favor of creditors ceases to accrue.
iConveyances of ownership, payments in advance, or establishment of mortgages or
!collateral pledges are void if made after the date fixed by the court as the date of
cessation of payments or within ten days preceding that date.

3. Composition with Creditors

Voluntary composition. Natural or juridical persons, whether merchants or
otherwise, ho have suspended or who are about to suspend payments, may propose
jto their creditors the signing of an agreement concerning assignment of property,
i1he complete or partial administration of the assets by the creditors, and extensions
oi- time or reductions in amount. The agreement may be extrajudicial or judicial
and may be proposed even after a declaration of bankruptcy has been issued.

If a judicial agreement is proposed, it must state the reason for the suspension
P1o payment, the proposals made, accompanied by a general balance sheet of the
business. and a complete list of the creditors. The application for compositionmust
be published in the Diario Oficial and in a widely circulated newspaper three times
Jl thn a period of fifteen days.

-' Until an agreement has been approved, only current transactions may be c-ar-
ied out, and in such a manner that the assets shall not be decreased nor the liabil-
ties increased.

When a creditors' meeting is organized it is informed of the application and
of the documents presented by the debtor and creditors, as well as of the report of
the review committed and of the classified list of creditors. The meeting must rat-
ify the judicial appointment of representatives of the creditors or may electothers.
All creditors whose credits have been recognized shall have a voice and vote in the
discussions relating to the agreement.

In order to be valid, the agreement that is reached must be approved by the
judge. The agreement affects all creditors except mortgage and collateral credi-
tors who abstained from voting. If an agreement is not accepted or is not approved
by the judge, the debtor will be declared insolvent and the necessary composition
or bankruptcy proceedings will be started.

Forced composition with creditors. Forced composition occurs when there
is a suspension of payments and a voluntary composition has not been possible, and
also whenever there are three or more legal claims pending against a debtor and
there are not sufficient free assets to cover the amounts claimed. In such cases
any creditor may request forced composition.

Bankruptcy. In those cases in which a prior agreement is not approved or
forced composition does not bring about an agreement between debtor and creditors,
the debtor will be declared in bankruptcy, retroactive to a fixed date.

Composition cases involve all assets, and all claims pending against a debtor
are consolidated. All individual claims pursued against him are terminated except
those based on mortgage or collateral credits.

4. Priority of Credits

The creditors have the right to be paid in full or pro rata if the proceeds from
the bankrupt property are insufficient, with the exception of privileges specifically
established by law (Articles 2384 to 2424, Civil Code).

Mortgage and collateral creditors do not enter the composition, and if they
abstain from participation in the decision of a creditors' meeting concerning an
agreement, their rights are preserved intact, so that they may continue separate
actions against the debtor with respect to property concerned.

Also excluded are the owners of non-fungible goods in possession of the debt-
or, or fungible goods still held in a safe or vault or in closed and sealed packages.

Credits for unpaid wages and indemnity compensation in money, equivalentto
six months' wages are first-class credits and entitled to absolute priority over any

For purposes of the composition, all remaining creditors are classified into
four classes, each of which, in order, has priority over the others.

The first class includes expenses such as the judicial costs common to allthe
creditors; the funeral expenses of the debtor; expenses strictly for the conservation
and administration of the property of the debtor; taxes due; pensions, credits, and
other real benefits that have become due -within the last five years.

The second class includes credits such as expenses for the conservation of
personal (movable) property, with priority to be paid from the value thereof; cred-
its for lodging furnished, with priority to be paid from property left behind by the
debtor in possession of the creditor; credits for freight charges, with priority in
the value of the goods transported in possession of the creditor; credits for seed,
with priority in the value of the fruits obtained therefrom, credits for the rental of
urban property, which has priority to be paid from the value of movable property
found in such property.

In the third class, the following have priority over the value of unmortgaged
real property and over personal property not included in the preceding classes:
a) credits for support of the debtor and his family during the six months preceding
composition, and the value of deposits of fungible goods that are consumed; b) cred-
its -of the Public Treasury and of charitable institutions.

The fourth class includes first, all credits evidenced by public instruments
and secondly, credits shown by private instruments.

All other credits not included in any of the four classes are consigned to a
ilnal classification.

5. Foreign Bankruptcy

There are no express provisions in Guatemalan law covering bankruptcies in
a foreign country, but in conformity with legal provisions in force there is no ques-
tion that a judgment rendered in a foreign country can be executed in Guatemala to
!the extent that it does not prejudice the national sovereignty, the public order, so-
c lal institutions, and the principle that property located in Guatemala, regardless
tof its nature, is subject to Guatemalan laws (Articles XXI and XXVII of the Consti-
tutive Law of the Judicial Organ).

In every case it is to be understood that adjudications of property made in a
foreign country cannot prejudice the rights of inhabitants of Guatemala, who shall
be duly apprised of such rights before a foreign judgment is executed.


A. General Provisions

Contracts are governed by the Civil Code of 1877, by the Commercial Code
(Articles 217 to 242) with respect to its special application to commercial contracts,
and by the Labor Code (Articles 18 to 37) with respect to labor contracts and agree-

1. Nature and Kind of Contracts and Obligations

a. Obligations. The law conceives two kinds of obligations: those that are
derived solely from law, and those that are derived from contracts or quasi-con-
tracts and from offenses, wrongs, and torts.

In the Civil Code obligations deriving from law, such as the obligation to pro-
vide support, the duties of a guardian, etc., are governed by special chapters onthe
subject concerned, while those deriving from contracts and quasi-contracts are gov-
erned by Book III of that Code (Articles 1395 to 2397) devoted to obligations ana con-
tracts as a whole.

b. Kinds of contracts (Articles 1396 to 1405). The law defines a contract as
an agreement made by two or more persons by which they are bound to give, to do,
or not to do something. They are divided primarily into unilateral and bilateral con-
tracts according to whether one or both parties incur obligations.

A contract.is consensual if agreement of the wills of the parties is sufficient
to perfect the contract, and the contract is realif delivery of a thing is required to
perfect it.

In another aspect, a contract is either principal or accessory, according to
whether it exists by itself or is dependent on the fulfillment of another obligation. A
contract is aleatory if profit or loss.depends on the occurrence of some uncertain
event. It is conditional if its existence or accomplishment depends on an occurrence
that is uncertain or unknown to the parties, and it is absolute if fulfillment is inde-
pendent of any condition.

A contract may contain any condition that is not contrary to law, but there is
no contract if fulfillment is left absolutely to the will of the obligated party. Hence
a contract may be conditioned on whether some event does or does not take place,
or occurs within a certain time. The condition may be stipulated to suspend or re-
scind the contract. A contract may also have a given time limit.

A contract may stipulate alternative obligations, at the election of the obli-
gated party or at the election of whoever has this right.

Two persons bound by the same contract may be obligated independently from
each other or may have joint and several obligations. A contract may also contain
a penalty clause against a party who fails to comply with the contract or specific

2. Capacity of the Parties

All persons over eighteen years of age have the legal capacity to make con-
tracts. Civil capacity once acquired is not altered by a change of domicile. Civil
capacity is suspended: a) by a legal declaration of incompetency (interdicci6n); b) if
a person is a deaf-mute and unable to make himself understood in writing; c) byblind-
ness at birth (Articles 6 to 14, Civil Code).

A declaration of incompetency takes effect from the date it is established by
final judgment and may be petitioned by relatives of the incompetent or by persons
who have some action against him; a guardian or the public ministry is under obliga-
tion to obtain such declaration. The incompetency ceases with the cause thereof, as
declared by judicial action.

Contracts may be oral, by correspondence, or in writing. A contract concern-
ing commercial matters may be oral if the amount involved does not exceed 1000
quetzales and in civil matters if not exceeding 500 quetzales, and does not relate
to real property. In all other cases a contract must be made by public or private
instrument; if it concerns real property it must always be by public instrument.
Every contract must be stated in domestic currency if it is to be fulfilled in

3. Proof of Contracts and Obligations

Civil contracts, if a public or private instrument is lacking, may be provedby
any evidence, except when they relate to real property or involve amounts over 500
quetzales, in which case admission is the only proof.

Commercial obligations and contracts are proved by the following means: a)
by public instrument; b) by private document,legalized or duly acknowledged; c) by
the invoices and minutes of a transaction, accepted by the party on which they are
binding; d) by correspondence; e) by commercial books kept according to law; f) by
appraisal, ocular inspection and other scientific means of proof; g) by testimony of
witnesses in contracts involving less than 1000 quetzales. This last means of proof
is admissible to prove a commercial contract of a larger amount for the purposes
of requiring the other party to draw up a public instrument (Articles 220, 221 and
241, Commercial Code).

4. Remedies

A contract has the force of law between the parties in all matters that are not
in violation of the law nor contrary to public order. To enforce fulfillment or to
claim compensation for damages for non-fulfillment, the parties may take appropri-
ate judicial action under civil law. Criminal action may be taken only if an offense
is involved as defined in criminal law.

There is no imprisonment for debts.

5. Distinction between Civil and Commercial Contracts

The difference between civil and commercial contracts is based on the defini-
tions of commercial acts (see Chapter V Merchants) and that a commercial con-
tract must be onerous and based on personal (movable) property. There are certain
contracts which, by their nature, are considered to be commercial unless it is
shown that they originate from a non-commercial act, such as letters of credit, pro-
missory notes, bills of exchange, checks, and other banking transactions, evenwhen
the drawers are not merchants.

B. Contracts

1. Formation of a Contract

Validity. The Civil Code (Articles 1406 to 1424) indicates as the essential re-
quirements for the validity of a contract: a) the consent of the parties; b) the legal
capacity of the parties; c) that the contract involve a certain material thing; d) that
there be a just cause for the obligation.

If consent is vitiated by error as to the substance of the thing, by fraud, or by
violence, the contract may be annulled by judicial action.

Object. The object of a contract may be anything that comes within the com-
merce of man, whether tangible or intangible, present or future, or it also may be
the mere use or possession of a thing. The object of a contract must be specified,
at least as to kind.

Perfection. A contract is perfected when there is a meeting of the minds of
the parties. In commercial matters, when the parties are orally conducting a trans-
action, this is considered to be perfected as a contract when the parties agree in
express terms on the thing and the object, the obligations due from each party, and
the manner of fulfillment. The party proposing a transaction has the right to retract
his offer before acceptance, unless a waiting period was stipulated.

2. Effects and Performance

As mentioned above, a contract has the force of law between the parties there-
to and produces reciprocal rights and obligations for each. A contract is binding
not only with respect to what is stated therein but also with respect to what is made
so by law according to its nature. It may not be rescinded except by mutual agree-
ment of the parties or for reasons specified by law.

A contract has no effects against third parties and if a contract is made to
modify or transfer real rights, it has effects against third parties only from the
time it is recorded in the Real Property Register.

If a commercial contract contains a penalty or indemnity clause, the injured
party may demand fulfillment of the contract or of the indicated penalty, but not

A commercial contract must be executed and performed in good faith; the in-
tention of the parties must be fully evident from the antecedents as well as the terms
of the contract, and it will be executed in conformity therewith without admission of
objections based on accidental defects as to meanings and terms used by the parties
(Articles 1425 to 1475).

3. Transfer of Contractual Rights

This matter is governed by Articles 1632 to 1643 of the Civil Code. The gen-
eral rule is that if a transfer of credits or other rights is to take effect against the
debtor or against third parties notification to the obligor by a judge or notary is re-
quired. Such notification is not necessary if it has been stipulated that the transfer
may take place without the need of prior or subsequent notification.

A transfer of rights or shares when the document is to the bearer, is made
by mere delivery of the document. If the document is nominative transfer is made
by endorsement. Normally a transfer is effected by whatever contractual form is
established for the transfer of ownership of other things, such as in sales, exchange,
etc. A sale or assignment of a credit includes its accessories, such as a surety,
privilege, or mortgage.

A creditor who sells a credit is not liable for the insolvency of the debtor un-
less expressly obligated therefore. Anyone who sells his hereditary right is obli-
gated solely to prove his status as heir.

The foregoing provisions governing transfer do not apply to bills of exchange,
promissory notes, and other commercial documents, which have their own special
means of transfer and which are based on the theory of literal interpretation of the
law and its incorporation in the document (Articles 275 to 278, Commercial Code).

C. Obligations

1. Extinction of Obligations

a. Payment (Articles 2300 to 2315). Normally an obligation is extinguished
by payment, which may even be made by a third party who thereby acquires the right
of recovery against the debtor unless the payment was made against the will of the

However, an obligation to do something cannot be fulfilled by a third party if
the creditor does not give his consent, unless the status of the performing partywas

A payment that is not made to the creditor or to his attorney or representative
for that purpose does not extinguish the obligation unless the creditor actually re-
ceives such payment. A payment made to a minor or incompetent does not extinguish
the obligation. A debtor who, contrary to judicial notification, pays a creditor is
not relieved of his obligation.

A debtor of various obligations has the right to indicate for which obligation he
is making payment.

b. Release of debt (Articles 2316 to 2321). A voluntary release or pardoning
from debt extinguishes the obligation. A release made to one of various joint and
several debtors extinguishes the debt, unless the creditor has reserved the rightto
collect it from the others, in which case the release is understood to pertain only
to the portion payable by the released debtor.

If a debtor is released from a debt his sureties are likewise freed.

c. Merger of rights (Articles 2322 to 2325). A merger of rights is another
means of extinguishing a debt and occurs when the status of debtor and creditor are
united in one and the same person. A merger of rights in the principal debtor ex-
tinguishes the obligation of a surety, but a merger of surety rights does not extin-
guish the obligation of the debtor or of other sureties.

The credits and debts of an heir who accepts an inheritance with benefit of
inventory are not merged with the debts and credits of the estate.

d. Set-off (Articles 2326 to 2336). A set-off is the reduction of one debt by
another, as between two persons who are creditors to each other. Set-off may also
occur by action of law, but in all cases it is necessary that the amount concernedbe
liquid and claimable.

Extensions of time granted to a debtor bar a set-off, but will not bar other
periods of grace granted by the creditor.

A set-off is prohibited in a suit for recovery of spoilage or recovery of a
bailment; and in debts due for payment of support, set-off is also prohibited with
respect to unpaid wages or services, to an amount equivalent to six months (Labor

A debtor cannot set off what is owed to his surety, but the latter can set off
what is owed to the principal.

A debtor who, without reserve, accepts an assignment of his rights to a third
party cannot claim a set-off of what was owed by the assignee.

e. Novation (Articles 2337 to 2348). Novation is another means of extinguish-
ing an obligation under Guatemalan law. It consists of the extinction of one obliga-
tion by the establishment of a new one in lieu thereof. In a novation, either the same
parties remain as creditors and debtors, with the debt or its cause changed, or the
debtor or creditor may change without changing the debt or its cause.

In a novation if one joint and several debtor is changed, the other joint debt-
ors do not remain obligated unless they have bound themselves by the new contract.

A mere extension of time for a debt does not constitute a novation.

f. Mutual dissent (Articles 2349-50). Where there is mutual disagreement
the two contracting parties may agree to extinguish an obligation, provided the rights
of a third party are not affected.

g. Oblation and consignment (Articles 2351 to 2354). This is a form of pay-
ment made by judicial order in the case of a creditor who refused to receive it. It
is effected by proceedings before a competent judge who after a hearing with the

creditor and presentation of evidence, shall rule whether or not the payment shall
be made.

h. Destruction of the thing (Articles 2355 to 2358). If a thing that is owed is
destroyed or lost by act of God, the obligation is extinguished. But the obligation
persists if loss or destruction was due to wrongdoing. In all cases the rights that
are retained in a thing or obtained by its possessor because of the destruction re-
main in favor of the creditor.

2. Rescission, Voidance, and Cancellation

Rescission (rescision) is the invalidation of an obligation, act, or contract
that was legally valid. There are grounds for rescission in the event of the com-
mission of fraud to the prejudice of creditors. The right to action for rescission
expires one year after signing of the contract or of making fraudulent payment.

An obligation is null and void if it cannot produce effects because of some fun-
damental defect, such as: a) if it relates to an unlawful act; b) if it is not based on
something that comes within the commerce of man; c) if the contract was made with
incompetents; d) if legal formalities were not observed; e) if there is substantial
error with respect to the object or persons, or if there is fraud, fear, or violence;
f) if there is no cause for the parties to obligate themselves.

Cancellation (resoluci6n) takes place through the occurrence of a condition
subsequent as expressly stipulated by the parties or by the satisfaction of a condi-
tion upon which the contract is extinguished.

In all cases, it is assumed in bilateral contracts that a condition subsequent
prevails if one of the parties fails to comply with his obligations (Articles 1456;
2359 to 2369).

3. Interpretation of Contracts and Obligations

In the interpretation of any contract the mutual intention of the parties prevails
over the literal meaning of the wording. If a clause may have two meanings, one
favorable to and one contrary to its validity, the former shall prevail, providedthat
it conforms most to the nature and subject matter of the contract. In case of doubt,
if the intention of the parties is not clearly shown, normal usage is considered.

All clauses are to be interpreted in the light of their relation to one another;
each is given the meaning derived from the contract as a whole. If it is not possible
to settle a doubt, the interpretation shall be made which is most favorable to the
obligor. If there is doubt as to the intention of the parties with respect to the prin-
cipal object, the obligation is null and void (Articles 2431 to 2439).

D. Quasi-Contracts

I. General Principles

The Civil Code refers to these obligations under the heading of "obligations
arising from presumed consent", together with quasi-delicts (Articles 2249 to 2297).

Obligations incurred without agreement are based on the following supposi-
tions: a) each one desires something useful; b) no one may enrich himself to the
detriment of another; c) anyone who wishes to make use of a fact is subject to its
consequences; d) everyone is liable for injury caused by his own act or for his neg-
ligence or carelessness.

The law defines quasi-contracts as lawful acts by which men become subject
to an obligation by virtue of consent presumed by equity.

A quasi-delict is a wrongful and unlawful act which does not incur criminal
liability, but only the right to action, in general terms, against someone for dam-
ages incurred from another person or thing in his custody or ownership.

2. Definitions

The following quasi-contracts are provided for in the Civil Code:

a. Business services. Any person not an agent who voluntarily undertakes to
manage the business or administer the property of another is under obligation to
direct and manage usefully and to the profit of the owner whatever business or ad-
ministration he assumes.

The representative (gestor) is bound to take charge of all matters relating to
the business; to continue negotiation until the transaction is completed, and to render
an accounting thereof and assume liability for his acts at all times, to the extent of
slight negligence (culpa levisima) including liability for an act of God if the type of
business is changed.

b. Undue payment. Anyone who pays something in error has the right to re-
cover it from the supposed creditor, if the creditor has cancelled or prejudiced the
document necessary for collection. Anyone who has made a payment in error may
claim restitution from the true debtor and if the person who received payment acted
in bad faith he shall be held liable for the principal amount as well as for the pro-
ceeds and interest.

c. Community property. Community property is the joint holding of universal
or singular property by two or more persons but without any of them having contract-
ed a partnership or made any other agreement relating thereto. The right of each
common holder in the common thing is the same as that of a partner in the assets of
a partnership.

The division of community property and the obligations and rights resulting
therefrom are subject to the same rules as those governing the partition of estates.


A. Civil Sales

1. General Principles

Civil sales are governed by Articles 1476 to 1631 of the Civil Code, which de-
fines a sale as a consensual and bilateral contract in which one party is bound to
deliver a thing and the other party to pay for it. Transfer of ownership does notre-
quire delivery of the thing or payment of the price; consent is sufficient.

A sale of real property has no effect with respect to third parties until the title
is presented for recording in the Real Property Register, and therefore, in the event
of two or more sales of the same real property, priority is given to whoever first
records the title. Every alienation of real property must be made by public instru-

A sale may be simple or conditional. The condition may either suspend the
effects of the contract or may cancel the contract because of non-fulfillment of the
condition. A conditional sale does not transfer ownership unless the condition is

Two or more alternatives may be the object of a sale, in which case the price
of each must be fixed and left to the election of only one of the contracting parties.
A sale of things by weight, number, or measure, is perfected when there is agree-
ment on the thing and price.

A sale on trial is regarded as made on the condition that the thing will be
tested and found to be of the quality agreed upon. Things that are customarily sold
by tasting are not considered sold until the purchaser is satisfied.

A sale is considered valid if a third person is appointed to determine the price,
but it is forfeited if such person does not wish to or is unable to determine the price.

If in fixing the price, the parties refer to the current price at a certain time
or place, it is understood that they are in agreement on an average between the
highest and the lowest in the event of variations or different prices in such place or
at such time. In all cases the price agreed upon must be in money. If less than
half of the price agreed upon is to be paid in money, the contract is one of barter
and not a sale.

If when a thing is sold it has been destroyed there is no sale, and if it is in
part destroyed, the purchaser has the right to a reduction in price or to disavow

the contract. There can be no sale of property belonging to another nor a purchase
of something belonging to the purchaser. Any simulated sale is null and void.

Anything that comes within the commerce of man may be bought and sold, un-
less prohibited by law. Sales may be of tangible things or of intangibles such as
credits, inheritances, easements and rights; future things such as pending fruits,
unborn animals, etc.; uncertain expectations, such as the catch of a fisherman; and
things under litigation, provided the purchaser is informed of the nature and status
of the litigation.

Any person not barred by a legal prohibition may be a buyer or seller. Spouses
may not purchase from each other. A guardian or custodian may not purchase prop-
erty of a minor or incompetent in their custody. An administrator may not purchase
property that he is administrating. An agent, without permission of his principal,
may not purchase property of the latter. The executor of an estate may notpurchase
testamentary property. Likewise, a judge may not purchase things that are to be
sold by his order; appraisers and their clerks may not purchase goods being sold
under proceedings in which they participate; a lawyer or procurador may not pur-
chase property being auctioned as a result of their actions; and creditors may not
purchase goods the sale of which they are to conduct. Sales made in any of thefore-
going circumstances are null and void.

2. Duties and Obligations of the Parties

Obligations of the seller. The seller is obligated to deliver the thing sold,
and is obligated as to warranty. The expenses of delivery, unless there is stipula-
tion to the contrary, are chargeable to him.

The thing sold must be delivered at the place indicated in the contract or, if
not stipulated, at the place where it was located when the contract was made. The
thing must be delivered in the condition it was in at the time of the sale. The obli-
gation to deliver a thing includes its accessories and whatever was intended to be
used with it.

If a seller does not effect delivery, the purchaser may demand either delivery
or rescission of the contract. If a seller delays delivery he is liable for the pro-
ceeds from the thing sold and for damages. If there are no proceeds and all or a
part of the price has been paid, the purchaser has the right to interest on the pay-
ment made.

The purchaser is entitled to damages if at the time of purchase the reason
which caused delay in delivery was known, and he cannot be compelled to receive
something equivalent to what was purchased; if the thing cannot be delivered the sale
is rescinded. A purchaser may withhold payment of the price if there is a delay in
delivery, and likewise the seller may withhold delivery if the price is not paid.

Obligations of the purchaser. The principal obligation of a purchaser is to
pay the price agreed upon, on the date and at the place indicated in the contract. If
no date or place is stipulated, the purchaser must pay the price when the thing is

Unless there is agreement to the contrary, interest is due for such time as
the price is not paid: a) if so stipulated; b) if the thing delivered produces proceeds
54 or income; c) if there is a delay in payment and judicial claim was necessary.

3. Cancellation

A seller may demand rescission of a sale because the price has not beenpaid
or if a stipulated surety has not been given. If the thing has not been delivered and
no surety has been given, the seller may withhold the thing until this obligation has
been met.

The rescission of a sale of personal property already delivered may not prej-
udice a third party who has bought from the first purchaser and who is now in pos-
session, unless there is proof of fraud. If the third party has not paid the price,
the first seller may demand withholding of the price in his favor.

If a purchaser is in unfortunate circumstances, the seller may demand return
of the thing sold unless payment is guaranteed. If a seller delays delivery of thing,
the period of time allowed for payment begins to run when delivery is effected.

Unless there is a stipulation to the contrary, if the purchaser is disturbed in
possession or has a just reason for fearing this because of a mortgage or recovery
action, he may suspend payment of the price until the seller causes such disturbance
to end or guarantees warranty, in which case only an amount sufficient to cover
such liability may be withheld. In an installment sale, the withholding shall be that
of the latest installments and not of the first.

If following a sale of real property some liability is discovered the value of
which exceeds one third of the price, the seller has the right to rescind the sale and
return the amount paid, with costs, to the purchaser.

In addition to other grounds for rescission or voidance of contracts, a sale
may be rescinded whenever it has been agreed that if within a certain fixed period
of time someone offers a higher price for a thing, it will be returned by the pur-
chaser. This period may not exceed one year, even if a longer term has been stip-
ulated. In all cases the purchaser is entitled to make an equal offer, and has the
right to be paid for improvements if the sale was rescinded because of the offer of
a higher price.

4. Warranty

The seller is obligated to give a warranty to the purchaser, which consists of
maintaining the purchaser in ownership and quiet possession of the thing sold and
of assuming liability for hidden defects.

In case of dispossession the seller must defend the thing sold in any suit against
the purchaser for a cause arising prior to the sale, and must pay the costs andloss-
es incurred in a suit by the purchaser as defendant. The seller must also pay for
any decrease in value of the thing due to hidden defects.

The parties may stipulate that there will be no obligation of warranty, but such
a clause is void with respect to personal acts of the seller.

By virtue of warranty, a purchaser has the right to claim: restitution of the
price, proceeds which he has been requir-ed to pay, expenses of a suit, andexpenses
of the contract that have been paid.

In case of hidden defects, the purchaser has the right to demand either that
the contract be rescinded or that he be reimbursed the difference in value. Action
must be taken within one year for purposes of demanding a reduction in price. A
seller also may ask for rescission of the contract in case of hidden defects of which
he was unaware at the time of the sale.

5. Promise of Sale

A promise of a sale is valid as a contract but it is not a sale and does not
transfer ownership, risk, or use to the purchaser. If an amount has been paid in
advance, either party may revoke his consent and the party who gave it shall lose
the sum but the party who received it must repay it twofold.

If a penalty has been stipulated for non-fulfillment of the promise, the obliga-
tion ceases when the penalty is paid. But if the provision for a penalty was not al-
ternative, the party who fails to fulfill the promise is bound not only to comply with
the contract but also to pay the penalty and the costs of a suit.

A promise of sale should specify the time the sale is to take place, which in
the case of real property may not be more than three years, and for personal prop-
erty not more than one year. If the sale is not effected within these intervals, the
entire obligation is ended.

6. Right to Repurchase

The right to repurchase is regarded as an accessory stipulation in a sales
contract by which the seller reserves the right to recover the thing sold by reim-
bursing the price. The thing returns to the seller free from any encumbrance im-
posed by the purchaser. A repurchase clause may not be made for more than one
year. If the seller does not make use of his right, ownership in full passes to the
purchaser (Articles 1619 to 1629).

7. Barter or Exchange

This is a contract in which two or more persons transfer the ownership of a
thing from one to the other. In a barter contract each party is both buyer and sell-
er, and each thing that is exchanged is a thing sold and the price of the other. The
exchange may be made with or without putting a value on the articles concerned.
The provisions governing sales also govern barter or exchange wherever they are
not expressly excepted by law.

B. Commercial Sales

Commercial sales are governed by Articles 243 to 273 of the Commercial
Code. These provisions are in the main exceptions to the general rules of civil
law governing sales, and special provisions concerning only commercial sales.
These differences are discussed below.

1. Special Forms of Sales

Sales on view. If a thing is kept on view and is designated only as to kind at
the time of the contract, there is no presumption that the purchaser has reserved
the right of trial. But this does not apply to things that are customarily bought by
taste. If the purchaser of a thing on view expressly reserves the right of trial, the
purchase is considered made on an optional condition lasting three days.

If a thing sold on view is customarily purchased by tasting, the right to trial
presumes and implies the condition that the thing is sound and of normal quality.

If a contract simultaneously specifies the kind and quality of a thing sold on
view, the sale is considered as being made on the condition that the thing is of the
kind and quality agreed upon.

Purchase by order. A purchase by order of a thing designated only as to kind,
implies that the purchaser has the right to cancel the contract if the thing is not
sound and of normal quality.

If the order specifies delivery at a given place, a condition precedent is im-
plied that the article will be so delivered.

Determination of object. If the thing is designated by kind and quality, the
buyer may cancel the sale if the merchandise does not meet the description.

If the sale is made taking into account the risks incurred by the object sold,
the contract is regarded as valid even if the thing no longer exists, if the seller was
unaware of its loss.

When goods are not individually designated, the seller fulfills his obligation
by the delivery of goods that are sound and of normal quality. At the time of deliv-
ery, a seller may require acknowledgment of the quality and quantity of the goods

2. Price

There is no commercial sale if the contracting parties do not agree on price
or the manner of determining it, but if a thing has been delivered, it is presumed
that the parties have accepted the current price on the day and at the place where
the contract was made. If there are different prices, the average price must be

If determination of the price was entrusted to a third person who fails to do
so, but the thing has been delivered, the contract is regarded as in effect for the
price of the thing as of the day the contract was made.

3. Loss and Deterioration

The loss, deterioration, or improvement of a thing after the contract was
perfected is at the expense of the purchaser, unless there is a stipulation to the con-
trary, or if the loss or deterioration was due to fraud or negligence of the seller or
internal defects of the thing.

Even when the loss or deterioration is due to an act of God and occurs after
perfection of the contract, it will be chargeable to the seller in the following cases:
a) if the object sold but not yet delivered bears no indications that establish its iden-
tity and distinguish it from others of the same kind; b) if by the contract, by law, or
by usage, the purchaser has the right of trial, but the object was lost or deterio-
rated before the purchaser had indicated satisfaction; c) if goods to be delivered by
weight, number, or measurement are lost before such operations were completed;
d) if the things were to be delivered after expiration of a specified period or after
being made ready for delivery; e) if there are alternative obligations and only one
of the things sold is lost.

4. Delivery

If it seems probable that a purchaser will be unable to pay, a seller is not
bound to deliver the thing sold unless payment of the price is guaranteed.

A thing is regarded as delivered by transmitting the bill of lading, invoice or
similar document; if the purchaser affixes his markings; or by any other means au-
thorized by commercial usage.

A seller is liable for preservation of a thing sold to the extent of fraud or
gross negligence.

A purchaser is not bound to receive delivery of only a part of the goods cov-
ered by a contract, and if he does so the sale is considered as effected only with
respect to that part.

The purchaser has the right to demand an invoice for goods and if he does not
do so within eight days after delivery, such delivery is regarded as irrevocably ac-


1. Form and Effects

Under the Guatemalan Civil Code (Articles 2184 to 2216), agency is a consen-
sual and unilateral contract which is perfected by the express or tacit acceptance
by the agent. Tacit acceptance occurs by the performance of any act of agency. An
agency contract may be made between parties that are present or absent.

There are two main forms of agency, general and special. It is general if
the agency covers all business of the principal, and special if contracted for the
performance of one or more certain and specified transactions. There is also ju-
dicial agency, for court actions (Articles 206 to 213 of the Constitutive Law of the
Judicial Power).

Agency may be constituted by public or private instrument, and even orally,
but if the commission or its performance refers to amounts in excess of 500 quet-
zales, the contract must be in writing. An agency may be established in a foreign
country to take effect in Guatemala, in accordance with the formalities necessary
in the country concerned, but must conform to the laws of Guatemala with respect
to its nature, validity and effects. In all cases it must arrive with the signatures
legalized before a Guatemalan consular authority, and after arrival the signature
of the consul must be legalized by the Ministry of Foreign Affairs, for which the fee
is 3 quetzales, and it is then authorized by the Supreme Court of Justice as valid to
be used in Guatemala.

It should be mentioned that in Guatemala, which differs from other countries
in this regard, the agent, even when acting by virtue of a general power, requires
express and specific authorization to perform certain acts. In order to have the
effects that the word "general" implies, a general agency must contain special au-
thorizing clauses for specific acts, and the omission of any act presumes that the
agent is not authorized to perform an act not mentioned.

Special powers are required for the following actions: a) alienation, mort-
gage, guarantee, donation, settlement, or disposition of the property of the princi-
pal in any other manner; b) purchase by the agent of property of the principal; c)
making admissions and acknowledging signatures; d) recognizing and disowning rel-
atives; e) submitting matters to decision by arbitration, and appointing or proposing
arbitrators; f) denouncing crimes, making criminal accusations or pardoning pri-
vate offenses; g) initiating or accepting separation or divorce, appearing at recon-
ciliation hearings, making most favorable settlements for the principal, and appear-
ing in suit for annulment of a marriage; h) allowing postponements, waiving suits
or remedies, exceptions, and challenges, or renunciation of these rights; i) making
compromises or agreements in relation to litigation, granting releases from

obligations or extensions of time, and asking for or accepting adjudication of prop-
erty in payment of debt; j) approving settlements and accounts.

An agent, if expressly authorized, may delegate the agency in whole or in
part to another person with or without a reservation to exercise it himself.

2. Duties and Obligations of Principal and Agent

Upon accepting the commission, an agent is bound to exercise the agency as
long as it is not revoked and is liable for damages resulting from nonperformance.
He must conclude any transaction that he has begun before the death of the princi-
pal, if its suspension would be detrimental.

An agent is liable to his principal for damages resulting from fraud or neglect
or if he does not follow instructions received from the principal, and he is also re-
quired to render an account of his administration of the agency. An agent may not
appropriate to his own use funds that he has received from his principal.

If an agent substitutes another to assume his powers, he is exempt from lia-
bility if the substitute is a person designated by the principal but he is liable for the
acts of the substitute if the latter is obviously incapable or insolvent. If the princi-
pal appoints two or more agents, these agents may divide the business affairs among
themselves, unless they are prohibited from acting separately, in which case their
separate acts will be null and void.

The principal is bound to reimburse the agent for expenses necessary in car-
rying out the agency, and to compensate the agent for losses incurred and he must
fulfill obligations contracted by the agent in accordance with the powers granted.

3. Termination

An agency may be terminated by revocation, by resignation of the agent, by
the death or incompetency of the principal or agent, by the bankruptcy of the prin-
cipal, or by conclusion of the purpose of the agency. In all cases, in any lawsuit,
the agent must continue to serve until a substitute is appointed, and any act he has
performed while unaware of the death of his principal or of any other circumstance
terminating the agency shall be valid.

4. Commercial Agency

A commercial agency is governed by the same provisions as are applicable
to agency under the Civil Code, but the agent is always considered as being remu-


1. Nature and Creation

Suretyship is an accessory contract, formed in the same manner as other con-
tracts, by which one person undertakes to be liable for the obligations of another in
the event that the latter fails to fulfill them. It is governed by Articles 2218 to 2248
of the Civil Code.

Any person who undertakes to offer another person as surety must offer aper-
son who has the legal capacity to make contracts, who is solvent, and who has his
domicile in the same Department of the country. Government employees are pro-
hibited from offering surety. The solvency of a surety is concerned only with the
status of his real property. A person who is unable to offer a surety for his obliga-
tions may post sufficient collateral or a mortgage.

2. Forms of Surety

A person acting as surety may be bound in the following ways: a) simply, by
undertaking to comply jointly and severally with the obligation of the principal if the
latter fails to make payment; simple sureties are liable for the aliquot part pertain-
ing to them; b) jointly among themselves when there are several sureties, wherein
any one of them engages to fulfill the principal obligation; c) jointly and severally
with the principal, when the latter and the surety agree that the obligation will be
fulfilled by either one or the other.

The bankruptcy of one of the simple sureties does not increase the liability of
the others. If the form in which a surety or sureties are obligated is not expressly
stated, it is understood to be a simple obligation.

3. Rights and Obligations of the Parties

A surety is bound only by what has been expressly stipulated as the obligation
and may never be held liable for an amount greater than that of the principal con-

A surety who pays a debt or a part thereof is subrogated to the rights of ac-
tion by a creditor against the principal with respect to payments. A co-surety who
pays a debt may collect from the remaining sureties for the share to which they are

The rights and obligations of a surety pass to his heirs.

4. Defense and Remedies

Simple sureties are entitled to the following benefits: a) not to be sued before
the principal is sued; b) that before any of his property is attached it must be shown
that the principal has no assets; c) that the debt to be paid by all sureties must be
divided into equal parts.

Any surety may demand that his principal relieve him from the suretyship in
the following cases: a) if either of the two is absent from Guatemala; b) if the debt-
or is likely to become insolvent; c) if five years have elapsed and the suretyship is
for an indefinite period and gratuitous. In any of these cases attachment of the
amount guaranteed may be demanded.

5. Extinction

Suretyship is extinguished on the same grounds as other obligations and, as
an accessory contract, it is extinguished upon fulfillment of the principal obligation.

Extensions granted by a creditor or a novation, without the express consent
of the surety, extinguishes the obligation of the latter.

If the surety has knowledge of the incapacity of the debtor, even though aprin-
ctpal contract is null and void, the suretyship persists.

6. Commercial Suretyship

Commercial suretyship is governed by the foregoing provisions, with certain
variations contained in Articles 477 to 481 of the Commercial Code. If a surety-
ship is to be considered commercial, the principal contracting parties must be
merchants and the surety must be for the purpose of ensuring fulfillment of a com-
mercial contract.

A commercial surety must be in the form of a public instrument or private
document or it is invalid.

The surety, by express agreement with the principal, may demand remunera-
tion. If this is payable, he may not ask for relief from the suretyship in case of an
obligation of an indefinite time that is prolonged for more than five years.


A. Maritime Commerce

The regulation of maritime transportation in Guatemala, found in the Com-
mercial Code, Articles 827 to 1166, is antiquated. Its age is due to the slight and
only recent development of commerce and suitable transportation in Guatemala.

1. Vessels

The law defines a vessel as the hull and keel, the rigging, and accessories of
every principal craft, regardless of its size or whether it is propelled by sail, oars,
or steam. Vessels are considered to be personal property (muebles), but because
of their importance must be recorded in a special register.

No vessel shall be considered as Guatemalan unless it is registered in Guate-
mala, in accordance with pertinent regulations. Registration and permission tofly
the flag are granted in the office of a captain of a port of entry.

Vessels may be acquired by any of the normal ways of acquiring property. A
vessel may be acquired by prescription if there is a just title and good faith and ten
years have elapsed, or by the mere lapse of thirty years, provided that it is not the
captain who claims acquisition by such prescription. Guatemalan vessels in a for-
eign country are transferred in accordance with the foreign law.

If a vessel is of more than ten tons, ownership, as against third parties, must
be shown by public instrument, noted in a special register kept by the Registrar
General. This provision also applies when the owner is the same person who con-
structed the vessel or ordered it constructed for his own account.

No recently constructed vessel may be navigated until it has been inspected
by experts appointed by appropriate authority.

A number of credits are preferential liens on the value of a vessel, in the or-
der given herein:

a) Fees, including those for official notices, costs of salvage, and pilot
b) Port charges;
c) Charges by depositaries and custodians of the vessel and expenses of con-
servation from the time of entry into port until its sale;
d) Rental for storage of the rigging;

e) Salaries, fees, and expenses of the captain and wages of the officers and
crew on the last voyage, without prejudice to their lien on the cargo. A
round-trip voyage is considered as a single voyage;
f) Debts contracted by the captain, during the last voyage, for the benefit of
the vessel;
g) Amounts owed to the last seller of the vessel or to provisioners, artisans,
and workers employed in its construction;
h) Amounts loaned as bottomry on the hull and keel;
i) Premiums for insurance contracted for the last voyage;
j) Indemnities due on the value of goods loaded but not delivered.

If a vessel becomes a part of insolvency proceedings, the above-mentioned
liens will be classified in the order given. In the event of bankruptcy of the owner,
these items will constitute preferred credits over all others in the value of the ves-

However, these privileges may be extinguished by the general rules for the
extinction of obligations, by judicial sale of the vessel in accordance with legal for-
malities and guarantees to creditors, and by the lapse of more than sixty days with-
out opposition by the creditors, counted from the extrajudicial sale of the vessel.

Any creditor may petition for attachment and auction of a Guatemalan vessel
in any port of the country in which it may be found. A ship that has already been
despatched is not subject to attachment except for debts contracted for equipping
and provisioning it. Foreign vessels may be attached only in Guatemalan ports,
for debts incurred within Guatemalan territory.

A captain or master of a vessel is not authorized to alienate a ship under his
command. But if the vessel becomes unnavigable, he may apply for its sale to the
court having jurisdiction. Notices must be published, according to legal provisions
for a period of eighteen days.

Foreign owners of a Guatemalan vessel are subject to Guatemalan laws in all
matters relating to navigation and safety measures, even in the event of war with
the nation to which such foreigners belong.

Co-ownership of a vessel does not constitute a company, but rather a commu-
nity of interest, governed by a system similar to that for community property.

2. Chartering (Articles 927 to 1046)

A charter is a transportation contract under which the owner of a vessel
leases it to another person and agrees to carry goods or persons to a specifiedplace,
in return for a price agreed upon. A vessel may be chartered wholly or in part.

The charter is "for general freight" if the carrier agrees to transport the
goods of the shipper on condition that he is able to combine the shipment with other
cargo. If the cargo is not completed within a certain period, the contract may be

Chartering of foreign vessels in Guatemala is subject to Guatemalan law. If
concluded in a foreign country, the contract is subject to Guatemalan law in all mat-
ters taking place in Guatemala.

The shipowner is obligated principally, under liability for damages, to place
a vessel fully equipped at the disposition of the shipper, to permit the latter the free
use thereof in the manner and for such time as is agreed upon, and to sign bills of
lading for the cargo.

The shipper is obligated principally to load and unload the vessel at the times
agreed upon, and to pay the stipulated freight charges. He may subcharter the ves-
sel wholly or in part, without consent of the owner, but he is not relieved of liabil-

In addition to the grounds on which all other obligations are extinguished, a
charter is rescinded without indemnity: a) by the prohibition against exporting at
the place of loading, or against importing at the place of discharge, unless the ship-
per desires to load other permitted goods; b) an interdiction against trade, declara-
tion of war, blockade, or act of God or force majeure that impedes the voyage.

A shipment of goods and the terms of transportation must be stated in a docu-
ment known as a bill of lading (p6liza or conocimiento).

In passenger services, unless otherwise agreed, meals are at the expense of
the ship.

3. Maritime Risks; Average

Unless some special agreement exists, liability, settlement, and payment of
average will be determined in accordance with the provisions of the Commercial
Code. In settlements of average made outside the country, the laws and usage of the
country concerned will be observed.

Damage caused by an accidental collision will be covered by the vessel that
sustained it, without action against other parties, but without prejudice to insurance
if it exists. If a collision was caused by negligence or ineptness of the captain or
crew of one of the vessels, the damage must be paid by the culpable vessel. If both
were at fault, each vessel must cover the damage it suffered. In case of doubt, the
damages are divided in half.

Forced landing of a vessel at a place or port different from the port of desti-
nation is lawful only in the event of unavoidable, unforeseen circumstances. It is
unlawful if due to the negligence or ineptness of the captain.

4. Bottomry (Articles 1167 to 1213)

Any loan for which, under any terms, the reimbursement of the amount loaned
and the premium paid depend on the safe arrival in port of the articles covered by
the loan is considered as bottomry. Bottomry may be obtained for the round-trip
voyage, outgoing only, or return voyage only. It may also be for a limited period
of time. But in case of doubt, the loan is regarded as having been made for the
round-trip voyage. It may be made not only in money but also in fungible goods,
for a fixed amount but adequate for consumption by the crew or service of the ves-

Bottomry may be guaranteed by a surety and the surety is considered jointly
and severally liable with the borrower, unless the parties agree otherwise.

A lender under bottomry assumes all risks of acts of God or force majeure
coming under the connotation "fortunes of the sea" which may cause complete loss
of the objects encumbered, within a time agreed upon. The risks assumed maybe
expanded by agreement.

5. Navigation; Ports

By law (May, 1939) there is at each port of entry a Commander and Captain
of the Port whose jurisdiction covers the area of the respective municipality. In
maritime and river ports, the Comandante has jurisdiction over all merchant and
private vessels, regardless of nationality, that enter territorial waters. In time of
peace, the official mentioned has no jurisdiction over foreign warships other
than diplomatic formalities.

The captain of a merchant vessel or private craft must at all times obey and
comply with the fiscal, marine, health, and police laws and regulations for ports of
departure, anchorage, arrival, and destination, and all other laws and regulations
in general, and must observe all formalities of respect and courtesy due the author-
ities of the country.

The Commander and Captain of the Port is the highest authority of the port
and is a delegate of the Executive in the performance of acts and immediate expedi-
tion of matters specified by laws and regulations.

Every vessel destined for Guatemala which arrives at a port of the country
must, before anchoring and obtaining a berth, hoist the Guatemalan flag and that of
the nation that issued its navigation license, and also the quarantine and mail flags,
or danger signal, if it is carrying mail or transporting inflammable or explosive
materials. As soon as it is anchored it must signal for a visit, which is made un-
der the authority of the Captain of the Port, accompanied by appropriate customs,
mail, military and sanitary officials. The captain of the ship must specifically in-
dicate whether he is carrying jewels, gold, or other valuable goods in the cargo con-
signed to the port, and whether he is carrying explosives or other dangerous goods.

If a vessel is compelled by force majeure to stop at a port in Guatemala that
was not its port of destination, the captain must submit a formal declaration of the
circumstances to the customs within twenty-four hours. If the vessel is in distress
the declaration may be submitted whenever circumstances permit and in any case
the cargo may be unloaded and reloaded, subject to precautionary regulations or other
measures deemed expedient by the Administrator of Customs, without liability of any
kind on the part of the government.

Pilotage in Guatemalan waters requires a special license, obtained from the
Commander of the Port. Any captain who uses the services of an unlicensed pilot
is subject to a fine.

B. Land Transportation

Transportation by land is governed by Decree 130 of Congress, promulgated
May 31, 1945. This decree provides that all freight and passenger public transpor-
tation services established in Guatemala must meet specified conditions as to safety,

efficiency and public benefit. The provisions of this decree also govern air space
and territorial waters.

Operation of public transportation services requires prior authorization and
registration by the Ministry of Economy, with the exception of urban services and
animal traction, which are subject to special provisions. To obtain authorization
application must be made to the Ministry of Economy or to the appropriate munici-

The authorization is based on consideration of the following points:

a) On the advantages of the service and detailed consideration of the economic
principles involved in order to prevent undue competition, unnecessary
duplication of investment, unfair elimination of small competitors, and any
other circumstance prejudicial to the national economy;
b) On the possibility of a resulting absorption or de facto monopoly of one or
more transportation lines;
c) On the degree of efficiency and safety that can be offered by the service,
chiefly with respect to freight and passengers and crews;
d) On the quality of the vehicles and other equipment to be used and any other
data deemed necessary.

If there are several applicants for the establishment of a transportation serv-
ice, priority will be given to native Guatemalans, under equality of circumstances.

Rates to be charged, supervision, and other economic questions, other than
for urban services, are under the jurisdiction of the Ministry of Economy.

Transportation is classified in three categories: urban, extraurban, and in-
ternational. Urban autobus and tramway services are within municipal jurisdiction.
A municipality may make contracts and grant concessions for the establishment and
operation of services provided they meet the general requirements mentioned above,
and also that they are awarded through public bids, and that the number of lines and
routes are fixed; no one person is to be granted more than three lines. The duration
of a municipal concession may not be longer than fifty years, as established by the
Constitution for concessions.

Any new urban passenger transportation service to be established as a fixed
or specified line by vehicles other than animal traction is subject to the provisions
of the law.

The existence of a railroad line between two points of the country, or of ship
or airplane services, shall not bar the establishment of transportation services by
autobus or other vehicles between the same two points.

In accordance with the Regulations for Extraurban Transportation, promul-
gated in June 1958, such public transportation services may be operated exclusively
by Guatemalan carriers. The regulations define a Guatemalan carrier as anyenter-
prise in which at least seventy percent of the capital belongs to native Guatemalans
and the personnel of which conforms to the percentage of Guatemalans required by
the Labor Code.

No carrier now established or that may be established in the future is entitled
to priorities or exclusive rights in the services of extraurban transportation lines.

Authorized carriers have the right to utilize any public roads that are suitable
for motor vehicle traffic, subject at all times to authorizations granted by the police.
The circulation of vehicles and transportation service lines of authorized carriers
may be taxed only by taxes imposed by the Legislative Branch, or toll charges lev-
ied by the State.

Auxiliary motor vehicle lines operated by railroads, shipping lines or airlines
are subject to the regulations described above. Such lines may not be authorized
unless sixty percent of the capital invested is contributed by native Guatemalan work-
ers employed in the enterprise or by other native Guatemalans.

Periodic public extraurban transportation services or any other occasional
transportation services in all cases require a transport license issued by the Direc-
tor General of the National Police, through its Department of Extraurban Transpor-
tation. This Department also approves the rates to be charged for services.

Railroad transportation is governed by the stipulations contained in the corre-
sponding concessions rather than by general laws.

C. Air Transportation

1. General Provisions

Air transportation is governed by the laws relating to transportation in gen-
eral and by Decree No. 563 of Congress of January 1949, the Civil Aviation Law.
This law affirms that Guatemala exercises full and exclusive sovereignty over the
air space located above its territory and territorial waters. Guatemala may grant
or refuse authorization to fly over its territory, or to land within its boundaries, to
private airplanes, whether of Guatemalan or foreign nationality.

Every airplane flying over national territory or that is found within its bound-
aries is subject to Guatemalan laws and authorities. Flying over or landing inGua-
temalan territory without prior authorization is prohibited. Airplanes and crews
that violate this prohibition are punishable by law.

All movement of national or foreign airplanes over Guatemalan territory is
subject to control by the Ministry of Communications and Public Works, through the
Civil Aeronautics Administration (Direcci6n General de Aeronautica Civil).

The principal functions and duties of the Civil Aeronautics Administration are
the following:

a) To study and propose all matters referring to the promotion and develop-
ment of civil aviation and all its industrial and scientific applications, in
the benefit of the social and economic interests of the nation;
b) To issue recommendations on all contracts and proposals requested or of-
fered by airlines for the operation of transport routes or other uses of civil
aviation in Guatemala;
c) To issue, extend, suspend, or cancel registration certificates and certifi-
cates of navigability of national airplanes and the licenses of pilots and
other flight officers of national airplanes, in those cases specified and pre-
scribed in the law or in related regulations;

d) To keep the National Aeronautical Register;
e) To grant or refuse permits for landing or departure, during non-working
hours of the Ministry of Communications, to foreign or national airplanes
coming from or going to a foreign country, and which do not have contracts
or permits to operate in the country;
f) To coordinate in behalf of the public interest the activities, training, and
services of different aeronautical organizations in the country;
g) To study, recommend, and grant licenses and supervise the establishment
and operation of civil aeronautics schools for instruction in all phases of
h) In general, to supervise, study, and make recommendations on all mea-
sures to promote the development of civil aeronautics and the encourage-
ment of safety and efficiency.

2. Classification

Within the meaning of the law, an airplane is any apparatus capable of rising
into, maintaining itself, and flying through the air, divided into those that are heav-
ier than air and those that are lighter than air. They are also classified as govern-
ment and private airplanes. The former are military or naval, or airplanes used
by the State for special governmental or public services. All others are considered
private planes.

Private planes are classified as: a) airplanes engaged in public transporta-
tion; b) airplanes used for aerial works, including those used for training purposes
or any industrial, scientific, acrobatic, or sanitary uses within the scope of civil
aviation; c) airplanes for tourist and sport purposes, including privately owned
planes for the private use of the owner, or for group uses, provided the owner does
not receive compensation of any kind; d) airplanes for research and experimental

3. Nationality

The nationality of an airplane is that of the last country in which it has been
registered. One and the same airplane cannot be registered in two places at the
same time. An airplane registered in another country may acquire Guatemalan na-
tionality after cancellation of its previous registration.

Every airplane recorded in the National Aeronautical Register is a Guatema-
lan airplane. The registration certificate is issued by the Civil Aeronautics Ad-
ministration upon application by the owner of the airplane. The registration mark
of a national airplane consists of the letter T (assigned to Guatemala as the nation-
ality mark) and the letter G, followed by a group of three capital letters of the al-
phabet, one of which should be a vowel.

4. Accidents

The owner of an airplane, the lessee, or in lieu thereof, the pilot in command
are required to notify the Civil Aeronautics Administration of damages of any kind
incurred by an airplane, within twenty-four hours.

Airplanes that have suffered an accident may not be placed in service after
their repair, without a certificate issued by the inspection service of the Civil Aero-
nautics Administration showing that the plane is navigable as before.

5. Documentation

Every airplane engaged in national or international navigation must carry the
following documents: a) certificate of ownership and incorporation; b) flight author-
ization certificate, to be kept on display; c) flight plan; d) engine log book; e) air-
craft log book. If the airplane is engaged in transporting passengers, freight, or
mail, it must also carry a clearance of take-off, passenger manifest, cargo mani-
fest, and crew list. A cargo manifest is not required for local planes, but a guta
or simple list is used.

6. Crews

No person may serve as a pilot or in other categories enumerated by law, or
as flight navigator, mechanic, or radioman, without first obtaining the respective
license. A license establishes that the holder is competent to perform the services
indicated therein. It is issued following approval of the good conduct, skill, and
health of the bearer, as determined by investigation, examinations in theory and
practice, according to the category of the crew member. Pilots' licenses are clas-
sified as: student pilot; private pilot; commercial pilot, category A and B; andpub-
lic transportation pilot. These classes are based on the number of hours of flying,
the type of airplane flown, and the technical knowledge of the applicant.

Military pilots may be issued civil licenses upon application for the class
corresponding to the experience, knowledge, solo flying hours, and type of aircraft
flown while in the Air Force, but in the case of commercial licenses and public
transportation they must meet all the requirements prescribed by laws and regula-

7. National Services and Traffic

Authorizations for the establishment of public transportation services or for
public industrial, scientific, or sanitary services will be granted by the govern-
ment under its power to make contracts between an interested party and the govern-
ment, through the Ministry of Communications and Public Works, following approval
of aspects concerning the Ministry of Economy, Ministry of Finance, and other
agencies of the State whose advice is deemed pertinent, and the Civil Aeronautics
Administration. These contracts must always conform to provisions of the Consti-
tution, the Civil Aeronautics Law, international conventions in effect, and any other
legal provisions that are applicable.

Public air transportation services are divided into national and international
services. National transportation services and other national services must be con-
ducted by native Guatemalans or by Guatemalan companies or enterprises in which
at least 51 percent of the capital belongs to native Guatemalans. These services
must always use nationally registered airplanes. Corporations organized for these
purposes may not issue bearer shares.

Contracts relating to national services must contain the following essential
stipulations, among others:

a) Definition of routes and itineraries, hours, and minimum frequency of
b) That the service shall not be suspended or changed without the express
permission of the Civil Aeronautics Administration, in case of-force ma-
jeure or weather conditions endangering flights or landings;
c) That the enterprise is required to notify promptly the Civil Aeronautics
Administration of the names and status of its pilots and other crew mem-
bers of its planes, and any changes that occur;
d) That the contract is granted for an initial maximum period of twentyyears,
which may be extended for additional periods of ten years each;
e) That upon expiration of the contract and its extensions, the works and serv-
ices shall revert to the State in perfect condition;
f) That the contract may be revised upon application of either party, at inter-
vals of not less than five years, with the understanding that any modifica-
tion must be in the interest of the public or of the parties, or on the basis
of technical advances;
g) That the enterprise shall be under obligation to transport mail delivered
to it by the government, in accordance with a subsidiary contractthatmust
be signed with the Administration of Posts and Telecommunications;
h) That the government will grant free entry to the enterprise, except for
consular fees and the fee for certificate of origin, for all necessary ele-
ments for its establishment, maintenance, conservation, and services, in-
cluding the road tax on aviation gasoline, for the duration of the contract.

Passengers may not be carried in the planes of freight shipping companies.

Any contract with a company for air transport or other air services may be
cancelled at the option of the government, for any of the reasons stated in Article
62 of the Civil Aviation Law. These are serious causes, and include among others:
alienation or encumbrance to a foreign government or its agency of rights acquired
by the contract, or admission of a foreign government or its agencies as a partner;
offenses against the sovereignty or security of the country; total interruption or sus-
pension of service on a fixed itinerary for fifteen consecutive days, except in case
of proven force majeure; violation of the basic stipulations of the contract.

8. International Services

The government is authorized, through the Ministry of Communications and
Public Works, to contract with a foreign airline to establish and operate public in-
ternational transport services. Any such contract must always conform to the pro-
visions of the Constitution, as well as to international conventions, the Civil Avia-
tion Law and corresponding regulations, such as those governing international air

All general provisions governing national enterprises are likewise applicable
to such foreign enterprises. If a contract is approved by the Executive an enter-
prise must post a bond amounting to 10,000 quetzales to cover any liabilities that
may be incurred.



A. General Provisions

Congress has the sole power to impose ordinary or extraordinary taxes in
Guatemala; a tax must be imposed by a law of general application that is compulsory
for all. Municipalities may impose local taxes (arbitrios) in accordance with the
needs of each municipality, but in all cases the express approval of the Executive
Power, through the Ministry of Finance, is necessary.

The principal tax legislation of Guatemala is contained in Decree No. 1153 of
1921; Legislative Decree No. 1617 of 1929; Legislative Decree No. 1831 of 1932
(Stamp Taxes); and Legislative Decree No. 214 of 1946.

There is no general income tax applicable to all income, but there is a pro-
gressive tax, payable every six months, on income or earnings derived from capi-
tal, governed by Legislative Decree No. 174 of 1954, discussed below.

The tax on earnings of lucrative enterprises, and the tax on inheritances, leg-
acies, and gifts are discussed below.

B. Income Taxes

Although there is no general income tax, the two taxes described herein are
taxes on certain forms of income.

1. Tax on Earnings of Lucrative Enterprises

Governmental Decree No. 2099, amended in part by Law No. 204 of the Con-
gress, provided for an annual, proportional, progressive tax on the liquid earnings
or net profits of lucrative enterprises of all kinds which operate on a nominal or
actual capital of Q. 2500. or more and whose net earnings exceed Q. 500. per
year or a corresponding proportion of this amount for a shorter tax period.

A lucrative enterprise is defined, for purposes of this law, as any commer-
cial, banking, industrial, or agricultural business or any activity organized to pro-
vide services to the public which an individual or juridical person, national or for-
eigner, operates or begins to operate for purposes of obtaining legitimate profits
within Guatemalan territory.

In determining liquid earnings or net profits, deductions should be made from
the gross income obtained during the tax period (whether from the direct operation,
lease of a business, or connected activities or operations or income supplementary
to the taxpaying entity) of ordinary and necessary expenses paid or incurred during
the tax period, as well as expenses of administration and conservation; interest,
commissions, premiums or other charges incurred with respect to credits obtained
in lieu of or supplementary to the capital itself; losses incurred through liquidation
of depreciated assets or by the exchange of foreign currencies necessarily used in
the business; uncollectable accounts or loans; losses incurred due to force majeure
or unforeseen contingencies, provided these losses are fully explained; and a rea-
sonable periodic depreciation of fixed assets, in accordance with provisions con-
tained in the regulations.

Gross income includes all receipts in either money, securities or credits
which increase the assets of the taxpaying enterprise and which the latter maymake
use of without obligation to reimburse their value, provided that such receipts are
derived from the business being conducted.

In the case of income paid in advance which corresponds partially or wholly
to various fiscal periods, the proportion corresponding to subsequent periods is
deferred. Income includes, as distinct from mere conventional and uncollected in-
crement, the profits derived from an increase in the value of real or personalprop-
erty, goods or other assets resulting from the sale of such property, or which are
distributed in any form among the partners or shareholders in an enterprise.

In those cases in which the increase in value of property, goods or other as-
sets merely creates a compensation account in the liabilities, such increase is not
regarded as income.

Deductible expenses. Ordinary, necessary, deductible expenses are those
representing a reasonable use or investment of money or its equivalent for the pur-
pose of acquiring or obtaining some article or service necessary to the maintenance
or operation of the enterprise. These expenses, the non-deductible expenses and
the periodic depreciations of fixed assets are described in the Regulations. The or-
dinary operating expenses of an enterprise include the value of taxes and other con-
tributions paid to or incurred in favor of the State or municipalities, with the ex-
ception of the tax on profits and fines connected with this tax.

Tax period. The tax period is the regular interval comprised between the
opening and reopening of the accounts of a lucrative enterprise and the date of clos-
ing and resulting preparation of its balance sheet and profit and loss statement.
Each tax period must be settled completely independently of the preceding and fol-
lowing periods in such a manner that the profits or losses shown cannot be affected
by prior or subsequent events occurring in its business.

The tax period may be one year, six months, one month, or even a shorter
period. In case of monthly or shorter periods, the tax is payable at the close of
each quarter.

Whenever the profits shown by a taxpaying enterprise in its balance sheets
can be determined only at the end of a year, the tax period begins on the first day
of the calendar year; and for such enterprises as well as those which commence
operations or activities during the course of a year, the closing date of the tax pe-
riod is the last day of the calendar year. If the balance is taken every sixmonths,

the tax period normally begins on January 1 and July 1 (or on the date when a new
enterprise starts its business) and closes on June 30 and December 31 each year.
However, in the event of a temporary suspension or permanent cessation of opera-
tions, or a change in the civil status or gainful nature of an enterprise, the merger
of one enterprise with another, a transfer from one town to another, change of own-
ership or death of an owner, etc., a special settlement or liquidation of accounts,
requiring that the results of the business be shown at a specified time, the enter-
prise must take the corresponding balance and profit and loss statement and present
this to the fiscal authorities within the period required by law.

Notwithstanding the provisions outlined in the preceding paragraph, if for
special business or personal reasons a taxpayer settles his accounts in periods other
than the calendar year or six months intervals, he may request the Ministry of the
Treasury and Public Credit to authorize a different tax period. If such special pe-
riod is granted it may not be altered without the consent of that Ministry. No change
may be made within an interval of twelve months.

Fixed assets. Fixed assets include all important values devoted to the opera-
tion of a lucrative enterprise, represented by real or personal property, tangible
or intangible, which are not subject to commercial, banking, industrial or agricul-
tural transactions, but which the enterprise maintains in fixed status as necessary
to its operation. The corresponding accounts are amortized periodically so as to
be extinguished by reasonable progressive diminution.

The fixed assets include, in addition to the usual expenses of installation, in-
curred prior to or in the course of operation (patents, concessions, initial advertis-
ing, cost of studies and plans, expenses of printing and issuing securities, real
rights, lawyers' fees, etc.), buildings, structures, lands, and other real estate
which, as property of the enterprise, are used in its business; machinery andequip-
ment peculiar to the enterprise; railway rolling stock; land and water motor vehicles
for passengers or freight; animal-drawn vehicles; vehicles for air transportation;
furniture and fixtures; any plant or factory structure attached to the ground or form-
ing a part of permanent, stationary material, including tracks, telephone and tele-
graph lines, water mains, drains, fences, tanks, docks, piers, bridges, sewers,
silos, scales, loading equipment, forges, ovens, and any other similar devices.

Any expenditure for the repair, improvement or expansion of tangible fixed
assets is not considered as an ordinary expense of an enterprise but should be
charged to installation expenses as established in the accounts, and is not confined
to a single fiscal period but is amortized over a reasonable number of successive
fiscal or tax periods. By virtue thereof, any expense of this kind amounting to 5
percent of the original value of the fixed assets should be charged to that item as an
increase therein. The same procedure is to be followed for any expenditure for in-
tangible assets amounting to 5 percent of original value.

Exemptions from the tax. In addition to those enterprises which are exempted
from taxes by law or by the terms of their concession contract, the following are
exempt from the profits tax:

a. Establishments engaged in teaching;

b. Mutual benefit and insurance societies and cooperatives organized in the
country, that may in some way be commercial in character in accordance with the
terms of the commercial Code;

c. Agricultural enterprises not divided into shares;

d. Hospitals and private nursing homes;

e. Life, fire, and accident insurance companies and those insuring against
other land or maritime risks, since such companies pay taxes monthly under the
terms of Article 26, section 11, of Executive Decree No. 1543 and under other pro-
visions of current legislation; but the tax payable on premiums of fire insurance
companies is expressly extended to earthquake insurance;

f. Amusement enterprises, which are subject to a special tax of 15 percent
of gross receipts, for the public welfare administration (Beneficencia Publica);

g. Mining companies, which pay taxes specified in mining laws;

h. Enterprises engaged in publishing newspapers, magazines, pamphlets,
and books, if they are confined to the art of publishing and do not have a separate or
connected business deriving income from advertising, paid space, subsidies; im-
ports of blank books, works of typography, lithography, zincography, photogravure,
stationery, other commercial articles, imported printed books, magazines, or
other foreign publications;

i. Radio news services whose profits or net earnings do not exceed Q. 3,000.
a year, or a corresponding proportion for a shorter period.

Exclusions. The following items are not included in gross income when deter-
mining the net profits or earnings of a lucrative enterprise:

a. The wages, salaries, fees, per diem allowances or any other remunera-
tion received by the owner or any partner in an enterprise in compensation for serv-
ices other than the business of such enterprise, even if for any reason such com-
pensation becomes a part of the funds of the enterprise; provided that this income
can be differentiated and satisfactorily proved;

b. Prizes from the National Public Welfare Lottery;

c. The proceeds of insurance policies or contracts of any kind paid at the
death of the insured or to a beneficiary who may include such proceeds in the income
of an enterprise which is subject to the tax; any amount received under similar con-
ditions and derived from health or accident insurance, and any personal indemnity
compensation received through judicial channels or by private agreement, for inju-
ries, illness, etc.;

d. The value of property acquired by an enterprise, its owners or partners,
as a gift, inheritance, or legacy, since it is taxed in another form;

e. Amounts received by an enterprise or its owners, as shareholders in
some other enterprise, if such amounts are derived from a reserve fund or other
funds which were subject to the profits tax;

f. Securities of the State or of Guatemalan municipalities, the income derived
therefrom, interest on any bonds of the Guatemalan public debt, and interest or
dividends on the bonds or shares of State organizations or those participated in or
supported by the State.

Tax rate. The tax on net profits is levied on a progressive scale. A profit
of less than 500 quetzals is not taxed. Starting with the category or bracket Q. 500
to 1000, on which the tax is 5 percent, each successive category in the scale rep-
resents the excess over the preceding and is taxed at a progressively increasing
rate up to a maximum of 43 percent on profits in excess of Q. 300,000. In calculat-
ing the total tax it is necessary to add together as many percentages as there are
categories up to the one including the profit figure to be taxed.

Tax on absentees. A tax on the same scale is imposed on interest, dividends,
participation, rents, and unanticipated earnings from any probable source obtained
within the Republic by foreign natural or juridical persons or by nationals residing
permanently abroad. This does not include interest on any bonds of the Guatemalan
public debt nor interest or dividends of State organizations or those which it sup-
ports or in which it participates.

Forms of collection. The profits tax levied on non-share-issuing enterprises
must be paid to the Income Administration (Direcci6n General de Rentas) in the cap-
ital of the Republic, or to its branch offices or Agencies of the National Treasury
in the Departments of the country, on the basis of a sworn statement executed by
the taxpaying entity or by the fiscal authorities.

The Regulations of the law provide that if an enterprise is organized as a
stock-issuing partnership (sociedad en comandita por acciones) or corporation (so-
cie.dad an6nima) the declaration should be submitted to the Departamento de Socie-
dades por Acciones (the Stock Companies Department).

The owner, administrator (socio gestor), manager, legal representative, or
agent of any business that is commercial, banking (excepting liability operations not
subject to license), industrial, agricultural (if incorporated), public utility, or a
combination of two or more of the preceding, which because of the size of its nom-
inal or actual capital and the amount of its net profits is subject to the law, must
present a sworn declaration, typewritten and in duplicate, on ten-centavos stamped
paper, containing the following information:

a) Name of the business or enterprise;
b) Place of business, with all pertinent data;
c) Nature of the business;
d) Name of the owner, partners if any, and managers;
e) Nominal or invested capital (current figure);
f) Net profits or earnings obtained during each of the three years preceding;
g) Period of taxation.

This document which serves as the due legal registration and record of the
enterprise must contain no abbreviations.

Periods and requirements for payment. The profits tax must be paid annual-
ly, semi-annually, or quarterly, according to the tax period stated. In making pay-
ments, the taxpaying entity must present to the fiscal authorities (within sixty days
after the close of an annual period, thirty days after a semi-annual period, or
fifteen days after the close of a quarterly period) a sworn statement of payment, on
forms that will be supplied, accompanied by duplicate copies of: a) a statement of
balance of accounts; b) the profit and loss statement; c) a detailed list of ordinary
necessary deductible expenses, and of losses, damages or depreciation of any kind;
and d) a list of uncollectable accounts and credits.

If the net profit or earnings is Q. 5,000.- or over, the balance sheet andprof-
it and loss statement must be certified by a licensed accountant or bookkeeper, who
shall be held liable under the Penal Code for any proven falsification, without prej-
udice to the liability of the enterprise.

Payment must be made upon notification of the acceptance of the declared
statement of profits for the last period ended; but such acceptance by the fiscal au-
thorities does not mean final approval of the accounts or of the exact amount of tax.

Upon receipt of a sworn statement of profits and accompanying documents, the
fiscal authorities may make any investigation deemed necessary to prove its cor-
rectness, within forty days or a longer period if circumstances so justify. After
any due adjustments are made, the taxpayer is given a period of ten days following
notification in which to make payment. A fine may be imposed for delinquent pay-

The tax payable by absentees, as described above, must be declared in a
sworn statement by the person who pays, credits, deposits or remits such income.
Article 27 of the Law provides a period of thirty days for the declaration and pay-
ment of the absentee tax, and anyone omitting this formality is subject to a fine of
from 25 to 500 quetzals, according to the gravity of the offense, and between 100
and 3,000 quetzals for repetitions.

However, if such income is constant and periodic, the recipient may make the
declaration and pay the tax every six months, in July and January. Authorization
to do so must be obtained from the appropriate authorities.

Penalties. Any person subject to payment of this tax who fails to make the
required periodic declaration and payment is subject to a fine of 25 to 500 quetzals,
according to the gravity and circumstances of the case, for the first offense, and
from 100 to 3,000 quetzals for each repetition. In the latter event, the fiscal au-
thorities may resort to compulsory measures.

A taxpaying enterprise making false sworn statements as to any information
relating to the profits tax is subject to the fines indicated above and may be sub-
jected in addition to imprisonment arresto mayor) of one to six months if imposed
by a court at the request of the Ministry of Finance and Public Credit.

Secrecy of tax information. Agents and officials of the Ministry of Finance
are forbidden to reveal any information as to sources of revenue, profits and losses
or any other data concerning a taxpaying enterprise. They must likewise not per-
mit any third party to obtain such information. Any violation of this prohibition is
subject to suspension of salary or dismissal, if the offense is serious.

Interested parties, however, may examine files pertaining to their own situa-
tion and certificates may be provided at their cost if desired.

Statute of limitations. The right of the State to claim or demand payment of
these taxes or to make corrections in provisional payments expires in six years.
This period is counted from the date on which the tax must be paid, according to
law, and in the case of corrections, from the date of acknowledgment of payment.

Accounting methods. Industrial enterprises subject to the profits tax must
make use of cost accounting methods which will clearly show true profits, if the

capital is over 25, 000 quetzals. Commercial enterprises shall be subject to such
controls as the Executive may authorize, for the same purpose.

Miscellaneous regulations. The Law is supplemented by extensive Regulations
which cover the points already mentioned as well as numerous additional details. A
significant provision is one requiring that within fifteen days following the opening
of an individual business or following the registration of a company or partnership,
a declaration of assets (declaraci6n de bienes) must be submitted to the proper fis-
cal authorities. Failure to comply with this provision is subject to a fine of from
25 to 3,000 quetzals, according to the gravity of the offense.

If the operating capital is less than 2500 quetzals no declaration is necessary,
but this must be presented whenever such sum is reached, as shown at the close of
an accounting period.

An enterprise having one or more branches, or which operates more than one
type of business, need make only one tax declaration if it has only one capital ac-
count and a single accounting system.

The Regulations enumerate what shall be considered as gross earnings, be-
fore deduction of expenditures: a) earnings derived from the direct operation of a
business; b) transactions inherent in such operations; c) rentals received from the
lease of a business; d) other activities, connected with the business, which are sub-
ject to the tax; e) proceeds from investments in businesses which are not subjectto
the profits tax; f) commissions, participating shares, exchange, and any other prof-
its obtained from normal activities of a business.

Profits from the sale of shares and other securities for speculative purposes
or mere investment are subject to the tax as well as those derived from the sale or
transfer of depreciated assets. Revaluations, deferred increases in assets and
certain others are not included.

Deductible expenses, as listed in the Regulations, include the following: a)
those incurred through the sale, advertising, and shipping of goods or merchandise;
b) expenses of administration of the business; c) general expenses not included in
the preceding groups; d) those incurred in the conservation, repair and maintenance
of assets used in the business; e) expenses of financing and those incurred because
of differences in exchange of foreign currencies used in the business proper; f) pe-
riodic allotments for reserves for bad debts; g) losses incurred in the sale of de-
preciated assets, if the residual value is less than the selling price; h) the depre-
ciations and amortizations of each fiscal period; i) losses incurred through unfore-
seen contingencies or force majeure, provided these can be proved satisfactorily
and they are not covered by insurance or reserves; j) taxes and other payments
made to the Treasury or to municipalities, with the exception of the profits tax and
fines imposed if any; k) losses incurred in assets subject to disappearance, break-
age, decomposition, leakage or other waste, by decreasing the inventories when
periodic balances are taken.

If partners in an enterprise perform evident active and continuous labor in
the business, their salaries in proportion to a progressive scale according to the
capital of the firm and the monthly salary are likewise deductible. Deductions are
limited to the salaries of three partners. Salaries paid to any member of a family
or relative of a partner are not deductible. Salaries of attorneys, agents, managers,
etc. are deductible but on the same scale applied to owners and partners.

2. Tax on Income or Profits Derived from Capital

This tax is governed by Decree No. 174 of December 13, 1954. The tax is
imposed on a progressive scale and is collected every six months on the following
forms of income: a) interest; b) dividends on enterprises not subject to the tax on
profits; c) rentals and subrentals; d) participation in enterprises not subject to the
tax on profits; e) raffles; f) private lotteries; g) any other income of the same na-
ture as the foregoing, even if only occasional.

This tax is levied on profits or income of over 250 quetzales during a six-
month period, in accordance with the following scale:


Q 250

to 500
6, 250



Incomes of over 7500 quetzales are
ing the profits of lucrative enterprises.

taxed at the rates imposed by the law tax-

All natural or juridical persons who receive income or profits in the cate-
gories listed above are subject to this tax. Such persons must submit to the appro-
priate tax authorities (the contralorfa del impuesto sobre utilidades, in Guatemala
City, and an administration de rentas, in the other Departments), within the first
fifteen days of January and July each year, a sworn declaration of income or profits
obtained during the preceding six months, or within eight days following the receipt
of occasional income.

On the basis of these sworn declarations, the tax authorities issue a provision-
al settlement and order for payment.

Income from capital pro indiviso is taxed on the amount obtained from the total

In the event that incorrect data is given in a sworn declaration, the amount of
the omitted tax is increased by 50 percent.

C. Inheritance Taxes

The tax on inheritances, legacies and gifts is governed by Decree of Congress
No. 431 of November 18, 1947. This tax is imposed on the following categories:

a. Gifts inter vivos or alienations by gratuitous title, of real or personal
property, money, quoted registered shares or securities, regardless of the place
where they are located, but provided the act or contract was executed in Guatemala.

b. The same transactions when the donor or donee or both are located in a
foreign country, regardless of where the contract was made, but providing the prop-
erty, shares, securities or money are located in Guatemala.

c. Inheritances, legacies, and gifts causa mortis of such property, money,
shares or securities, regardless of where they are located, provided the settlement
of the estate occurs in Guatemala.

d. Inheritances, legacies, and gifts causa mortis of personal property, mon-
ey, shares or securities located in Guatemala, regardless of the domicile of the
principal, his heirs, place of settlement, place of issuing the instrument, or place
of death of the deceased.

e. Inheritances, legacies, and gifts by any title of real property located in
Guatemala, and real rights in such property, regardless of the domicile of the prin-
cipal, his heirs or legatees, the place of legal settlement or issuance of the instru-

f. Inheritances, legacies, and gifts, by any title, of real property located
outside Guatemala, if the contract was made in Guatemala or settlement of the es-
tate was opened or took place in the country.

g. A waiver or forgiveness of debts, regardless of their nature or origin, if
the act or contract was executed in Guatemala or if the property that served as a
guarantee is located therein.

h. Inheritances, legacies, or gifts by any title, of real or personal rights,
personal property, money, registered shares or quoted securities, regardless of
the domicile of the donor or principal, the place of settlement of an estate, or is-
suance of a contract or will, provided that the property is derived from a source
existing within Guatemala.

i. A renunciation or cancellation of rights of usufruct or pensions, on prop-
erty located in the country, although the instrument was issued outside Guatemala.

Payment of an equal or different tax in a foreign country on property located
in Guatemala does not exempt the person concerned from payment of this tax in
Guatemala. For tax purposes, however, certain fully established debts of the do-
nor or deceased may be deducted from the amount donated, inherited or bequeathed
(Article 4, Decree N. 431).

For tax purposes, relationship is divided into seven categories, as follows:
1) children, the spouse, or in certain cases the concubine; 2) ascendants, descend-
ants other than children, adoptive parents, adopted children; 3) collaterals in the

second degree of consanguinity; 4) collaterals in the third degree; 5) collaterals in
the fourth degree; 6) legal relatives by affinity; 7) non-relatives.

The progressive rates of taxation by category of relationship and size of the
taxable estate or share are as follows (Article 7):

(1) (2) (3) (4) (5) (6) (7)

Up to Q 50,000 1 2 3 5 7 9 12
" 100,000 2 3 4 6 9 10 14
" 200,000 3 4 5 7 10 11 16
" 300,000 4 5 6 8 11 12 18
" 500,000 5 6 7 9 12 13 20
Over Q 500,000 6 7 8 10 13 14 25

In case of relationship by adoption, the adoption must have taken place atleast
five years prior to the donation by or death of the principal, with the exception of
children of one spouse adopted by the other. In the case of a beneficiary not dom-
iciled in Guatemala at least one year prior to the donation by or death of the prin-
cipal, there is a surtax of 60 percent on the amount affected. A temporary absence
does not break established domicile (diplomatic and consular service, study abroad,
health, etc.).

D. Other Taxes

1. Customs Duties

Decree of Congress No. 1269 took effect January 14, 1959. This decree con-
tains the new Customs Tariff which, as its text indicates, "replaces all laws, pro-
visions, and resolutions which tax the importation, reimportation, exportation, re-
exportation, reshipment and transit of goods."

The new Tariff adopted the Uniform Central American Tariff Nomenclature.
Its schedules are designed to promote agriculture and industry on a broad scale, as
well as a simplification of administrative procedures in supervision, computation
of duties, collection and control.

2. Tax on Coffee Exports

The provisions of Decree No. 282 of April 27, 1955, governing the taxation
of coffee exports, have been essentially incorporated in Decree No. 1269, the Cus-
toms Tariff.

The tax is imposed on coffee exports on a unit basis of 100 Spanish pounds
(46 kilograms) for all types of coffee and is levied at a varying percent or fixed
amount according to the price of coffee. The basic price is the F. O. B. price at
Guatemalan ports, in accordance with the daily quotation for Colombian coffees at
the close of the Coffee Exchange in New York, after deducting expenses involved
after leaving a Guatemalan port. The Central Coffee Office (Oficina Central del
Cafe) is required to keep a register of the daily New York coffee quotations.

The Bank of Guatemala acts as collecting agent of this tax and as trustee of
the proceeds which are distributed according to law. Coffee exporters must report
their transactions daily to the Central Coffee Office and must comply with a number
of other rules and regulations. There are also certain requirements for coffee
producers. Fines are imposed for non-compliance.

3. Stamp Taxes

The use of stamped paper or tax stamps is compulsory on all contracts and
on a number of other transactions and documents. The value of the stamped paper
or of the tax stamps depends on the nature of the document and the amount of mon-
ey to which it relates or the amount of the transaction. The normal rate of the tax
at present is five per mil, but lower rates apply to checks, bills of exchange, and
other documents against a foreign country, as well as for judicial proceedings and
other documents used within the country.

4. Property Tax

There is a three per mil annual tax on the declared value of real property.
There is an additional tax on large uncultivated estates.

5. Exemptions for Hotel Enteprises

Designed to promote the hotel and tourist business of Guatemala, Decree No.
573 of February 29, 1956 provides certain tax exemptions for hotel enterprises.
Construction materials and other equipment intended for the construction of hotels
or for the expansion or modernization of existing hotels are exempt from import
duties and taxes. Natural or juridical persons who establish a hotel business sub-
sequent to the enactment of this decree will be exempt from the profits tax andfrom
any income tax that may be enacted. On an investment up to Q 500, 000 the exemp-
tion is for three years; from Q 500,000 to 1,000,000 the exemption is for four years;
and for an investment of over Q 1,000,000 the exemption is for five years.


A. General Provisions

1. Legislation

The subject is covered by the Labor Code and the Law on the Guatemalan So-
cial Security Institute, with concrete rules for enforcement contained in pertinent
regulations. The Labor Code (Decree No. 330) now in force was promulgated to
take effect as of May 1, 1947 and was amended by Presidential Decree No. 570 of
February 28, 1956. It is based on the Constitution of 1945 but continues in effect
within Lhe principles of the Constitution of 1956. The 1945 Constitution asserted
various minimum guarantees relative to the regulation of labor relations and con-
sequently did not exclude others deriving from social justice nor those achieved by
workers in their struggles or agreements with employers. Primary concerns of
the Constitution of 1945 were the settlement of labor disputes, and the safeguarding
of workers' rights and equity, whereas the Constitution of 1956 regulates labor re-
lations somewhat more rigidly and imposes the principle of "conciliation" as a rule.

2. Fundamental Principles

The following basic principles in the Constitution 'with respect to labor may
be cited (Articles 112 to 123):

a) Guardianship, to the effect that the State must oversee the protection of
workers within the framework of the law;
b) Conciliation between capital and labor, to the effect that the State must
also protect the former under conditions of equity and justice;
c) The principle that rights cannot be renounced, that is, any stipulations im-
plying a diminution or distortion of the rights of workers are null andvoid
ipso jure;
d) A guarantee, by constitutional mandate, that laws must be enacted to cover
provisions governing at least the basic aspects of labor-employer relations,
such as the minimum wage, to be fixed periodically; days of rest and vaca-
tions; protection of women or minor workers; union rights and the rightto
strike or shut-down; severance pay; priority for Guatemalan workers; and
payment of wages in money.

The most important aspects of the Labor Code are, without doubt, those re-
lating to labor contracts and agreements, to wages, working hours and vacations;
to the inspection system; and jurisdiction in preventing or settling individual and
collective labor disputes.

3. General Principles

The law defines an "employer" as any person, individual or juridical, who
utilizes the services of one or more workers by virtue of a written contract or a
simple labor relationship. It makes an employer liable for the acts of his legal
representatives or persons who represent his authority in the direction and admin-
istration of his enterprise. The employer is likewise jointly and severally liable
with any intermediary who employs workers to his profit.

These general provisions of the Code stating that the principles contained
therein are legal standards of public order, applicable to both public and private and
domestic or foreign enterprises, provide that in case of a conflict between labor
and social laws and any other laws, the former shall prevail. It is also provided
that cases not covered by the Code shall be decided, primarily, in accordance with
principles of labor law; secondly, in accordance with equity, custom or usage, in
harmony with those principles; and lastly, in accordance with principles and provi-
sions of ordinary law.

The Code also requires that the general principles of labor law and its regula-
tions are to be interpreted basically in accord with the interest of workers in har-
mony with the social welfare.

B. Protection of Workers

1. Working Hours

The regular work day consists of eight hours and may not exceed forty-eight
hours a week. Night work may not exceed six hours daily or thirty-six hours a
week. A mixed work day comprises work performed before and after five A. M. or
before and after eight P. M., but if more than four hours of work are performed
during the night period, it is considered to be night work rather than mixed.

A work day may be continuous or may be divided into two or more periods with
intervals of rest, adapted to the nature of the work and to the needs of the worker.
In a continuous day, a worker must be given at least one rest period of half an hour.

Work performed outside the regular hours is considered to be overtime and
is remunerated by an additional fifty percent in industrial enterprises or twenty-
five percent in agricultural enterprises hiring more than five hundred workers and
in enterprises not included in these categories. Regular hours and overtime added
together may not exceed twelve hours a day.

Persons who act as "representatives of the employer", those holding over-
seeing positions, those working without immediate supervision, and those who from
the specific nature of their work cannot be subject to regular hours, are not subject
to the limitations on working hours.

The Executive Power, through the Ministry of Labor, is empowered to issue
regulations necessary for suitable application of these rules to enterprises inwhich
special circumstances are involved (Articles 116 to 125, Labor Code).

2. Holidays and Vacations

The law specifically establishes what days shall be holidays with pay, weekly
days of rest with remuneration (one day for every six days of continuous work), and
provides for annual vacations for workers.

Vacations must have a minimum duration of fifteen, ten, or five days. In
commercial undertakings and industrial enterprises with more than nine workers,
employers have the right to fix the date of vacations provided that they fall within
sixty days following a calendar year of continuous work. The vacation periodmust
be uninterrupted and must be paid in advance (Articles 126 to 137).

3. Wages

General. The Labor Code (Articles 88-115) permits three forms of payment
of wages: a) by unit of time (by the month, fortnight, day, etc.); b) by unit of work
(for the job, piece, task, etc.); c) by sharing in the profits, sales, or collections.

The law requires an employer to pay equal wages for equal work and payment
must be exclusively in money of legal tender, at the place, day, and hour agreed
upon. The wages agreed upon between employer and worker may never be less than
the minimum wage.

The period for payment of wages to manual workers may never be more than
fifteen days and for other workers this may not exceed one month. However, pay-
ments based on participation in profits may be liquidated annually, but with period-
ical payments granted the worker according to his needs.

The minimum wage or wages not exceeding 30 quetzales and a percentage not
lower than 70 percent of wages over 30 quetzales or of the legal minimum may not
be attached except for payment of support or of debts for lodging or food, for which
70 percent and 60 percent may be attached, respectively.

As an additional protection, the necessary tools, instruments, or equipment
of a worker required in his trade or occupation may not be attached. Wages not in
excess of 100 quetzales per month may not be assigned, sold, offset, or encumber-
ed in favor of persons other than the wife or concubine and family of the worker who
reside with and are supported by the worker.

Advances made by an employer to a worker and debts of the latter to his em-
ployer must be amortized in a minimum of five pay periods, unless the worker pays
themvoluntarily in a shorter period. Credits for wages or indemnity compensation
to which a worker is entitled, up to an amount equivalent to six months wages may
be collected by summary judicial action and are considered as a first-class lien,
with absolute priority in a universal judicial settlement.

Whenever permanent workers, by agreement with the employer or by provi-
sion of law, work less than forty-eight nours a week, they are entitled to receive the
full wages corresponding to a full work week. For purposes of administrative con-
trol and inspection, all employers must keep a book recording the wages authorized
by the Department of Labor and Social Welfare.

Minimum wage. Every worker has the right to receive at least a minimum
wage to meet his normal material, moral, and cultural needs and which will allow
him to fulfill his duties as head of a family.

The Labor Code (Articles 103 to 115) requires that the minimum wage shall
be fixed periodically after previous studies made by joint committees (comisiones
paritarias) covering the minimum wage to prevail in each region according to its
peculiar conditions and employer possibilities in each economic activity. But in
practice, with the exception of textile labor and some others, the determination of
minimum wages is a task yet to be accomplished.

4. Work by Women and Minors

The general rule is that the work of women and minors shall be suitable for
their age, physical conditions, and intellectual and moral development; but both
women and minors are entitled to the same rights and benefits as all other workers
(Articles 147 to 155).

Minors. The work day is decreased by one hour a day for workers over four-
teen and under eighteen years of age and by two hours for workers under fourteen,
for whom special authorization is required. When it is necessary that a minor under
fourteen must work as an apprentice, the work must be light and not incompatible
with the education of the minor. The labor inspection service may authorize an in-
crease in working hours for minors up to the limit for adult workers.

Minors are prohibited from performing hight work, overtime, dangerous or
unhealthful work, or work by day in bars or similar establishments.

Women. Women workers, whether married or single, are entitled to the same
rights as male workers. Discrimination for reasons of sex are expressly prohibited.
Women workers are excluded from dangerous or unhealthful work and from night
work, except as nurses or domestic servants.

Pregnant women or those nursing children may not be discharged on those
grounds and their discharge for other reasons must be previously authorized by the
inspection service. Work demanding considerable physical effort may not be re-
quired of pregnant women during the three months prior to childbirth and they are
entitled to leave with pay for thirty days prior to childbirth and forty-five days there-
after. Every nursing mother is entitled to two rest periods of half an hour each to
nurse her child. Every employer of more than thirty workers must provide a place
where children under three years of age may be attended and cared for.

5. Health and Safety Regulations

Every employer is obligated to adopt such measures as are necessary to ef-
fectively protect the life, safety, health, and morality of his workers, in accordance
with laws and regulations. Consequently, he must take the necessary steps at his
own account within the periods indicated by the labor inspection service to introduce
health and safety regulations that comply with this obligation. Likewise, every em-
ployer must comply with the safety measures prescribed by the Guatemalan Institute
of Social Security for the prevention of accidents and occupational diseases.

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