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  • GDP, US$bn: 68.8
  • GDP per capita, US$: 4,147.2
  • Population, mn: 16.3
  • Inflation, CPI ave: 4.4
  • FX, LCY/US$: 7.6
  • Budget Balance, % of GDP: -1.1
  • Mining GVA, US$bn: 1.2
  • Mining Industry Value, US$bn: 0.9
Regulatory Risk Rating
49
0
100
Score: 49
Substantial Risk
Guatemala is not without risk; its law confers security of tenure in almost every provision that might be considered critical, yet it also almost always reserves the smallest of cracks for discretionary action to operate. It is a simple and elegant piece of legislation drafting and if only it tweaked in a handful of places it would be rated a very good code.

Corruption Potential Index

Score: 50
Moderate Corruption Potential

Corruption Risk Index

Score: 69
Low Corruption Risk

Regulatory Risk Rating

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Environmental Overview Commentary plus sign

GUATEMALA ENVIRONMENTAL REGULATION

GENERAL

Guatemala, officially the Republic of Guatemala, is a country in Central America immediately south of Mexico and sharing other borders with Belize, Honduras, El Salvador, and the Pacific and Caribbean Oceans. It covers an area of 108,890 km² and has an estimated population of over 15 million people, making it the most populous state in Central America. Guatemala is a country rich in biodiversity; in fact, the country’s name originates from an old Aztec word which means ‘the place of many trees’. It has some of the highest mountains, largest lowland tropical forests and wildest environments in Central America. As with many countries in the Central and South American regions, deforestation, mainly caused by human activity, has caused considerable damage to biodiversity; Guatemala has however reserved around 32% of its territory as protected, securing land for national parks and biological reserves.

Guatemala is believed to have the most endemic species of any Central American country. Its wildlife is contained within multiple ecosystems, ranging from mangrove, pine and cloud forests to sub-tropical jungle. This wildlife includes 250 species of mammals; 200 species of reptiles and amphibious creatures; numerous species of butterflies and other insects; and over 600 bird species. In addition, the country houses over 8,000 plant species.

Alongside deforestation, water pollution is an issue for Guatemala, as is its susceptibility to natural disasters.

PRINCIPAL LEGISLATION AND REGULATOR

The EIA process in Guatemala is comprehensively regulated under the Regulation for Environmental Evaluation, Control and Monitoring (No. 137-2016) (Environmental Regulation). Projects are categorised into one of four categories (Category A, B1, B2 and C) under the Exhaustive List of Projects, Works, Industries or Activities 2016 (Exhaustive List). In relation to mining projects, the Mining Law (Decree 48-97) is also of relevance.

The Ministry of Environment and Natural Resources (MARN) has a decentralised structure, following changes in 2009, when regional and departmental delegations were created by ministerial agreement. The MARN’s General Directorate for Environmental Management and Natural Resources (DIGARN) oversees the Environmental Impact Assessment (EIA) process and issues decisions on Environmental Licences. In relation to environmental review and licensing, DIGARN is supported by the National Co-ordination Department (DCN) which administers the assessment process, issues Environmental Licences for lower impact activities (Category B2 and C) and carries out certain aspects of the review process in respect of higher impact activities (Category B1). In relation to high impact activities (Category A) DIGARN is responsible for the complete assessment and review process (see Regs. 8 – 9, Environmental Regulation). The Ministry of Energy and Mining (MEM) is also a key body in the EIA process, with its Social and Environmental Management Unit (Unidad de Gestión Socio Ambiental) responsible for analysing, evaluating and advising on EIAs and overseeing the implementation of mitigation measures.

EIA PROCESS

According to the Mining Law an EIA is required for mining activities. Article 20 provides that those interested in obtaining an Exploitation Licence must submit an Environmental Impact Study (EIS) to the MARN (and the National Council for Protected Areas if applicable) for review and approval. The Mining Law is somewhat inconsistent in its drafting as to whether or not an Environmental Licence and EIA are necessary as a condition to obtaining the Exploitation Licence or whether the Environmental Licence is required as a precondition for the commencement of development activities.

Under the environmental legal framework, activities are divided into four categories:

  • Category A: activities have a high environmental impact or level of environmental risk;
  • Category B1 – activities have a moderate to environmental impact or level of environmental risk;
  • Category B2 – activities have a moderate to low environmental impact or level of environmental risk; and
  • Category C, low environmental impact or level of environmental risk (see Reg. 19, Environmental Regulation).

 

The Exhaustive List provides details of activities and their respective categories.

The following mining activities are listed under Category A:

  • The extraction of non-ferrous metal minerals (uranium and thorium);
  • The extraction of non-ferrous minerals including aluminium (bauxite), copper, lead, zinc, tin, manganese, chrome, nickel, cobalt, molybdenum, tantalum, and vanadium; and
  • The extraction of precious metals including gold, silver and platinum.

 

The following mining and exploration activities are listed under Category B1:

  • The extraction of ferrous minerals (hematite, magnesite, limonite) and metals;
  • Exploration activities involving the use of test and exploration drilling;
  • Exploration activities undertaken through methods of geophysical prospecting (magnetic method); and
  • The repair and maintenance of mining machinery.

 

Prospecting activities, through the collection of samples and geological observations, are listed as Category B2 activities. Note that no mining activities are listed under Category C, therefore this commentary will not provide detailed guidance on the environmental assessment required for activities under this category. If projects are not listed then the MARN, through the DIGARN or departmental delegation, may categorise the project (Reg. 18, Environmental Regulation). The process for categorisation is provided and essentially involves the submission of terms of reference for the project / activity (Reg. 18, Environmental Regulation).

The assessment process and the environmental assessment instruments applicable will vary depending on the category of the project or activity. The Environmental Regulation contemplates three broad types of environmental instrument – complementary, corrective and predictive (see Regs. 3(48) – (51) and 12 – 16, Environmental Regulation). Category C projects will require an initial environmental evaluation (EAI) and a low impact environmental diagnosis (DABI) only, whilst Category B2 projects will require an Environmental Management Plan in addition to the EAI and DABI (see Regs. 3(30) and (19), EIA Regulation). For projects in categories A and B1 an environmental diagnosis (DA) and an EIA will be required. Individual or legal persons, registered with MARN as Environmental Consultants must be used to carry out the assessment work required (Reg. 3(15), Environmental Regulation). All environmental instruments must be submitted to DIGARN or the DCN (depending on the category applicable) and must be accompanied by a sworn affidavit in which the proponent commits to comply with all environmental control measures, management plans and obligations (see Regs, 21-22, Environmental Regulation).  

Category A / B1 Requirements

Category A projects are regarded as having the highest environmental impact and are subject to the most rigorous approval procedure. That being said the requirements for Category A and B1 projects are very similar in nature. In the first instance, the DA must be conducted, and the EIA Study must be completed. Detailed guidance on these processes is available on the MARN website in the form of Terms of Reference (TOR) for the DA and guidelines for the EIA Study. In relation to the EIA Study the document must contain: an introduction to the project; general information on the documentation submitted and the team responsible; a detailed project description; the legal requirements applicable; the investment amount; descriptions of the physical, biological and socio-economic / cultural environments; identification of the environmental impacts and the proposed mitigation measures; an environmental management plan; risk analysis and contingency plan; and environmental forecasting information on the implications of the project (see EIA Study Guidelines).

Following the submission of the environmental instruments to DIGARN, a multidisciplinary group may be appointed to carry out the review (Reg. 23, Environmental Regulation). Category A and B1 projects are also subject to public participation requirements. Proponents must publicise their project, make the environmental instruments publicly available and grant interested parties 20 days to submit comments on the proposed project (see Regs. 43-45, Environmental Regulation). The opinions and observations made during the public hearings shall then be considered in the Final Resolution issued at the end of DIGARN’s analysis (Reg. 47, Environmental Regulation). Following the completion of any public hearing, DIGARN shall have 90 days to analyse the environmental instruments for Category A projects or 30 days for Category B1 projects, though note that such periods may be extended (see Regs. 23 – 24, Environmental Regulation). For mining projects, a favourable opinion of the MEM on the viability of the project must accompany the environmental instruments (Reg. 29, Environmental Regulation). There are also requirements for certain mandatory opinions or permits to be obtained where projects take place in protected areas or designated forest areas (Reg. 29, Environmental Regulation).

Upon completion of its analysis (according to the timelines noted), the DIGARN will issue a Final Resolution approving or rejecting the environmental instrument (Reg. 34, Environmental Regulation). A Final Resolution approving the project will incorporate environmental obligations, control measures and details of any environmental bond requirements. The value, validity and term of the Environmental Licence shall also be given (Reg. 34, Environmental Regulation). The DIGARN shall have 30 days within which to issue the resolution following the completion of its analysis (Reg. 35, Environmental Regulation).

The grounds upon which environmental instruments may be rejected are clearly stated under Regulation 33 and shall be detailed in the final resolution rejecting the environmental instrument. Appeal procedures apply in relation to negative decisions.

Following the issuance of a Final Resolution approving the environmental instruments, an Environmental Licence will be issued by the DIGARN (Reg..60, Environmental Regulation).  Environmental Licences in respect of Category A and B projects will be granted for a term of between three and five years (Reg. 61, Environmental Regulations). Environmental Licences must be in place throughout the lifecycle of a project, including construction, operation, and closure; holders are required to continuously renew the licence and pay the renewal fees throughout the life of the mine (Reg. 61, Environmental Regulation; see also Reg. 62, Environmental Regulation).

Environmental bonds shall be required and must be presented within 30 days of the issuance of the Final Resolution (see Regs. 48 – 57, Environmental Regulation). Changes or modifications to the original environmental instruments must be notified (Regs. 39 – 40, Environmental Regulation).  

Category B2 Requirements

In respect of Category B2 projects, either DIGARN or the DCN will carry out the assessment of the EAI, DABI and Environmental Management Plan. Terms and guidance on these instruments are also available on the MARN website. The analysis of the instrument by the relevant authority shall be completed within 15 days (Reg. 25, Environmental Regulation). Public participation requirements shall not apply and there are no obligatory inspection requirements (Reg. 37, Environmental Regulation). Environmental bonds (at a lower rate than Category A and B1 projects) shall apply (Reg. 51, Environmental Regulation). Licences shall be issued for the same time period as noted above.

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Mining Overview Commentary plus sign

GUATEMALA – MINING REGULATION

 GENERAL

Guatemala, officially the Republic of Guatemala, is a country in Central America immediately south of Mexico and also sharing a border with Belize, Honduras, El Salvador, and the Pacific and Caribbean oceans. It covers an area of 108,890 km2 and has an estimated population of over 15 million people, making it the most populous state in Central America. Its capital is Nueva Guatemala de la Asunción, also known as Guatemala City. The Guatemalan economy is particularly reliant upon agricultural products, including coffee, bananas and sugar. For many decades, its mining industry was challenged by an internal civil war that ended in the mid-1990s.

Since the mid-1990s, exploration has taken place in the mining sector and new discoveries have been made. Today, the mining sector is growing in importance and one of the major participants in the sector is Goldcorp and its offspring, Tahoe Resources, which operate the Marlin (gold) and Escobal (silver) Mines, respectively. The country also has potential for copper, cadmium, antimony, nickel, lead, zinc, limestone, barite, bentonite, sulphur and marble. Guatemala is the third largest producer of antimony in Central and South America, with only Bolivia and Mexico producing greater quantities. Guatemala also produces industrial minerals, primarily for domestic use, including gypsum, barite, talc, feldspar, salt, limestone, clays, sand (including silica sand) and gravel.

PRINCIPAL LEGISLATION AND REGULATOR

The Mining and Energy Ministry (MEM) is the main regulatory body, responsible for monitoring and supervising mining activities. The legislative framework for mining comprises the Guatemalan Constitution; Mining Law (Decree 48-97) and its regulation (Government Agreement 176-2001); along with the Environmental Protection and Improvement Law (Decree No. 68-86). Pursuant to its Constitution, all minerals belong to the state (Art.121.e, Constitution). While the Mining Law regulates the licensing of mines and quarries, petroleum products fall outside of the law.

GRANTS AND MINERAL TITLE

Any person or entity, national or foreign, is entitled to mining rights. Article 12 of the Mining Law states that the principle of “first-come / first-served” applies. As well, a mining operator with either a Reconnaissance or Exploration Licence takes precedence in obtaining Exploration or Exploitation Licences, respectively. The Mining Law provides for the following permits in order to carry out mining activities:

  • Reconnaissance Licences: granted for an initial period of six months, which may be renewed for a further six months. Licences may cover an area ranging from 500 km2 to 3,000 km2. Reconnaissance activities must start within a period of 30 days of grant.

 

  • Exploration Licences: granted for a period of up to three years, and renewable twice for a fixed term of two years each, with a 50% relinquishment requirement in each renewal. Exploration Licences may not exceed 100 km2 and work must commence within the first 90 days. A mitigation study is one of the requirements for conducting exploration work. Mitigation studies are technical reports that describe the biological, physical, and socio-cultural characteristics of the local setting and identify protection and mitigation measures.

 

  • Exploitation Licences: granted for a maximum term of up to 25 years, renewable for another maximum period of 25 years, over an area of up to 20 km2. The disruption of mining activities for more than three years results in the revocation of the licence. Exploitation licences may be refused under the Mining Law, particularly as a result of third party opposition, albeit the extent to which the government may act arbitrarily is uncertain.

 

Transfers require the prior approval of the government and no criteria are set out to guide the circumstances in which approval may or may not be granted. In 2014, Guatemala proposed an increase in the royalty rate to 10% to try to address a budget deficit (see Decree 22-2014). As stated by one foreign participant in the sector, this change reflects a certain political immaturity on the part of the government and certainly immaturity in the administration of the minerals sector.

 DEVELOPMENT CONSIDERATIONS

The holder of an Exploitation (or Exploration) Licence is obliged to submit an annual work report to the Mining Directorate. Additionally, surface fees and/or royalties if required must be paid. An environmental impact study is necessary to conduct exploitation work, which must be approved by the Ministry of Environment and Natural Resources (MARN)(Art. 20, Mining Law). Once an Exploitation License is issued, operations leading to the development of the deposit must begin within 12 months. According to Article 77 of the Mining Law the holder of a permit has the right to access surface land via an easement. In relation to private land compensation must be paid to the owner or occupier for damages or prejudices caused; if compensation cannot be agreed, any party may refer the matter to a judicial court or to arbitration. Where a landowner is opposed to an easement, the matter may also be referred to a civil court.

 ENVIRONMENTAL REGULATION

 See Guatemala – Environmental Regulation.

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