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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 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. 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 Environmental Protection and Improvement Law (Decree No. 68-86), dating from 1986 and amended in 1993, provides the legal framework for environmental impact assessments (EIAs) in Guatemala. 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 decentralized 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 EIA process and issues decisions on Environmental Licences. 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 to the MARN for review and approval, except for those activities taking place in protected areas in which case the EIA must be submitted to the National Council for Protected Areas. The Mining Law is somewhat inconsistent in its drafting as to whether or not an environmental licence and EIS are necessary as a condition to obtaining the Exploitation Licence or acting upon it to commence development activities.

An initial submission by the mining operator to the DIGARN with basic information will result in the screening and classification of the project. There are four different categories: Category A, high potential impact on the environment or environmental risk; Category B1, moderate to high potential impact on the environmental or environmental risk; Category B2, moderate to low potential environmental impact or environmental risk; and Category C, low potential impact and/or environmental risk. Those projects falling into Category B2 or C will be reviewed by departmental delegations, which will also issue Environmental Licences for such projects, within 15 days for Category B2 and 10 days for Category C. DIGARN will assess all other initial submissions to establish whether or not the project meets environmental requirements. The initial submission for Category B1 projects will also be assessed within 15 days.

If the project is classified as Category A or B1, an EIA and EIS are mandatory following Terms of Reference produced by the MARN. The procedure for Category A projects requires two to four months, in lieu of 10 to 15 days, for the initial screening process, depending on whether the project is considered to be a national mega-project. The EIS outlines potential risks and environmental impacts in the area of influence and includes a plan for environmental management, a contingency plan and an analysis of social and economic impacts. The EIS is made public and public comments may be made. The study is ultimately approved or rejected. In the case of mining, petroleum and energy projects, the recommendation of the Ministry of Energy and Mining will be sought; this is mandated in the Mining Law. For approved projects an Environmental Licence will be issued by the MARN via DIGARN. Negative decisions of DIGARN can be appealed to the administrative law court.

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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 National Commission of the Environment (CONAMA)(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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