Interview with Mr. Enrique Rodríguez Mahr, President of the Guatemalan Banking Association and CEO of G&T Commercial Bank

19 Feb Interview with Mr. Enrique Rodríguez Mahr, President of the Guatemalan Banking Association and CEO of G&T Commercial Bank

Guatemala has built one of the strongest and most resilient banking systems in Central America. Financial inclusion has already reached 65 percent of its adult population this year, with a clear goal of reaching 90 percent. What are the key factors that have driven this progress in recent years?

Guatemala stands out for its strong and stable banking sector and for sustained double-digit growth over the past few years, which has complemented the country’s overall economic expansion. Guatemala has never been known for exceptionally high growth, but neither has it experienced exceptionally low growth. We consistently grow between 3.5 percent and four percent. Even during the pandemic, the country proved remarkably resilient, experiencing the smallest economic contraction in Latin America and one of the smallest in the world.

What I would like to highlight in particular is Guatemala’s macroeconomic framework. The country has a very stable, consistent and disciplined macroeconomy, with one of the lowest fiscal deficits in Latin America and the world. Our public finances are in order and this has allowed the banking sector to enjoy the stability that a modern financial system requires. Banking depends on both savers and borrowers, so without stability, the system would quickly become strained.

Last year was marked by very high inflation globally, but Guatemala once again demonstrated its resilience. Our maximum benchmark interest rate was 5 percentage points lower than that of the U.S. Despite this difference, deposits did not leave Guatemala, as economic activity remained strong.

Another key factor worth highlighting, one that has helped consolidate both the macroeconomy and the financial market, is the role of remittances. Remittance inflows are reaching approximately $25 billion, equivalent to nearly 22-23 percent of GDP. This has significantly strengthened consumption and generated considerable dynamism in private banking. However, this is also a wake-up call. While it is true that countries like Mexico receive three times more remittances than Guatemala, those flows represent less than three percent of Mexico’s GDP. In our case, remittances already account for more than 22 percent of GDP, which is becoming a source of financial pressure. This income enters the country but is not generated domestically, creating inflationary pressures. So far, these pressures have been counteracted by monetary policy and by the exchange-rate system managed by the Bank of Guatemala, which intervenes when there is either an excess or a shortage of dollars.

Over the past two years, there has been an abundance of dollars which has resulted in monetary losses that must be taken into account. This brings me to the crucial point of attracting foreign investment that produces and creates value in Guatemala. Guatemala has all the necessary conditions: its geographic location, macroeconomic stability and a strong, stable banking system capable of supporting all types of investment.

That said, we also face significant challenges. We must strengthen our infrastructure — ports, highways and airports — as well as our institutions, a challenge shared across Latin America, where political institutions are often weak. In Guatemala, however, we have effectively separated the economic sphere from the political sphere. This has allowed us to preserve economic stability despite the political difficulties of the last decade. The Bank of Guatemala is among the country’s most prestigious and solid institutions and Guatemalans recognize and value its role.

Another important issue is access to banking services. While we have made significant progress in financial inclusion, the informal economy remains very large. Although difficult to measure, it is a major driver of overall economic activity and is deeply rooted in cultural practices. Substantial efforts have been made to expand banking services nationwide through digitalization, mobile technology and ATMs. Still, there remains a segment of the population that resists regulation, as they understand that operating through banks requires participation in the formal system. Nevertheless, we are moving in the right direction.

Guatemala has also undergone a significant structural transformation. In the past, 80 percent of economic activity was concentrated in Guatemala City, while the rest of the country was largely neglected. A common criticism was that the capital prospered, while rural areas lagged behind. Today, that has changed. Across the interior of the country, one now sees shopping centers, apartment buildings and industrial and logistics complexes. This has revitalized local economies.

If Guatemala grows at four percent this year, the interior of the country is likely growing at 6-7 percent, while Guatemala City may grow around 1.5 percent. This indicates that investment is becoming more evenly distributed, which is positive for wealth distribution, one of the country’s long-standing challenges. We are making tangible progress in this area.

Since its founding in 1961, the Guatemalan Banking Association (ABG), has established itself as the leading voice of the country’s private banking sector. How has the association redefined its role as a spokesperson and support entity for the sector?

At ABG, we take pride in several achievements. One is that we bring together both private and state-owned banks. Alongside the supervisory authorities and the Bank of Guatemala, we work continuously to modernize legislation and ensure a dynamic, modern banking sector that keeps pace with rapid technological change. This is not done by each bank independently, but through coordinated effort. That is ABG’s core mission: maintaining close collaboration with the Superintendency of Banks and the Bank of Guatemala to align with international best practices.

We clearly recognize the need to standardize regulations and move toward Basel and other international frameworks. In the area of combating money laundering, ABG has been a leading voice, emphasizing the importance of Financial Action Task Force and Financial Action Task Force of Latin America membership, international cooperation and protecting capital from illicit activity. We firmly believe in applying the highest regulatory standards.

Another major responsibility is the management of the national clearinghouse through ABG’s sister company, UCG. We operate this system jointly with the Bank of Guatemala, which has entrusted us with this critical task. Guatemala now has a highly modern Automated Clearing House infrastructure that allows instant transfers between individuals and banks, via mobile phones or ATMs, at any time. The creation of this ACH has been fundamental to the sector’s digital transformation.

What major priorities do you have as ABG and, in a financial world that is ever more digital, how important is cybersecurity for the association?

Cybersecurity is a priority. We have established a committee that will become a legal entity this year, ensuring minimum security standards across the entire system. Since banks vary greatly in size, we support smaller institutions in meeting these standards. The vulnerability of one bank is a risk to the entire system and ABG serves as the forum for coordinated action.

We also focus strongly on financial education through the Banking School. Our programs range from elementary school students to businesses seeking to better understand banking and risk management. We even invite unregulated financial institutions to participate because we believe greater inclusion benefits the country.

Despite progress, cash usage remains high: approximately 70 percent of transactions are still conducted in cash, largely due to the informal economy. Addressing this challenge requires education and trust-building and this remains one of our central priorities. ABG’s role is not to intervene in competitive dynamics, but to help build a modern, sound and competitive banking system. Competition among banks is intense, yet it operates within a strong regulatory framework that ensures stability. All banks—large, medium and small—maintain solid capital and solvency indicators, which reinforces confidence in the system.

The banking sector has expanded its financing, advisory and inclusion programs to help thousands of SMEs and entrepreneurs grow. How would you describe the banking system’s commitment to boosting entrepreneurship and small and medium-sized enterprises and how is the ABG leading this effort?

All banks see significant opportunity in serving SMEs, particularly by expanding into the interior of the country, where most of these businesses operate. The entrepreneurial spirit in rural areas is impressive — local brands, bakeries and family businesses often grow into regional powerhouses.

Much of the banking sector’s growth is now occurring outside the capital, but informality remains a major challenge. Many SMEs operate primarily in cash, use personal accounts for business transactions and avoid formal accounting and tax obligations. This is not driven by high taxes — Guatemala has one of the lowest tax burdens in the region — but rather by cultural practices.

Both the public and private sectors are studying international experiences to encourage formalization, which brings significant benefits. Financial education is critical here. For example, informal workers pay VAT on purchases but cannot recover it. If they formalized, they could reclaim those taxes, but many people are unaware of this.

How is ABG, along with the country’s leading banks, positioning Guatemala as an ideal destination for international, especially American, capital?

We are working closely with government institutions and regulators to achieve investment-grade status. Guatemala already meets most of the macroeconomic requirements and its bonds trade at levels comparable to investment-grade countries. Infrastructure remains a key challenge, particularly ports, airports and electricity generation.

Energy investment is especially urgent. Guatemala was an energy exporter five years ago, but growth has increased domestic demand. While the energy mix remains relatively clean, regulatory and environmental hurdles have slowed expansion. We are now advancing solar, wind and natural gas projects, but more investment is needed.

Foreign investment is essential to consolidate growth and improve living standards. Guatemala has a strong domestic business sector that reinvests locally, but international capital is crucial to meet the country’s future development needs.

As general manager of Banco G&T Continental, what services does the bank offer and why does it represent an attractive opportunity for potential investors from the United States?

G&T is the third-largest bank in Guatemala and boasts 75 years of history. We operate exclusively in Guatemala and provide a broad range of banking services. Our portfolio is currently 60 percent corporate banking and 40 percent consumer banking, a balance that has shifted significantly in recent years as we expand in consumer and SME banking.

Digitization has been transformative. Today, 80 percent of our transactions are digital, compared to around 30 percent before the pandemic. Most products can be accessed via mobile phones and branches are evolving into relationship-focused offices. This shift reflects demographic trends, especially among younger clients.

We already have digital credit and digital opening of checking and savings accounts, where people can basically manage everything themselves. Eighty percent of our products can be purchased using a cell phone. We’re transforming our branches into business offices where people can start a relationship with us face to face. But increasingly, we have to go out and find customers because fewer people are using physical banking services these days. This is especially true for young people, which has implications for our demographics.

The entire system has moved towards digitalization and we believe we will continue to grow in that direction. We are currently also working on electronic wallets, as are all banks. We’ll see what emerges, as we have a very agile and dynamic clearinghouse that operates 24/7. Digital wallets have struggled to take off in Guatemala, unlike in countries like Panama, Peru, or Colombia. Here, you can use your bank account to pay anyone else with an account at any bank and if they don’t have an account, you can send the money to their phone number and they can withdraw it from an ATM.

This has fulfilled the same function as digital wallets do in other countries. In Guatemala, this is already resolved through the clearinghouse. We’ll see if any truly successful wallet emerges and manages to stand out, but personally, I think it’s unlikely because we’re already efficiently meeting those needs.

What would be your final message as president of the Banking Association and as general manager of G&T Bank?

I would like to take this opportunity to invite anyone who hasn’t read much about Guatemala to do so, because it’s truly worthwhile. We have a beautiful country with impressive natural resources and people who are incredibly warm and welcoming. Guatemalans are easy to love and good people by nature.

Furthermore, we have favorable conditions for investment. We have demonstrated a democratic maturity that has already resulted in several decades of democracy and stable government. We firmly believe in private property. In Guatemala, people take care of their property and their land, both large and small. Guatemala has promoted entrepreneurship. We would like more people to come and invest, because here we have the willingness and the human resources to grow capital and do business.