Rethinking Regional Attractiveness in Escuintla, Guatemala

4. Place-based industrialisation as an instrument for inclusive and sustainable development

Abstract

This chapter examines the diverse approaches to Industrial Parks and SEZs as strategic instruments for economic growth, competitiveness, and regional development. It distinguishes clearly between Industrial Parks and SEZs, highlighting their specific regulatory frameworks, governance structures, and policy objectives. Particular attention is given to Guatemala’s experiences, analysing historical evolution, regulatory challenges, and impacts on economic performance. Additionally, this chapter provides a comparative overview, drawing insights from best practices across Latin America, OECD countries, and other examples, exploring emerging trends such as digitalisation, sustainability, and urban-industrial integration, to inform future place based industrial development strategies.

A variety of approaches to industrial parks and SEZ

Industrial Parks and SEZs are widely used to stimulate local economic development, but their impact depends on how they are designed, governed, and integrated into broader territorial development strategies. When effectively implemented, they can strengthen regional competitiveness, attract investment, and promote inclusive and sustainable development. However, their success is not guaranteed. Many SEZs worldwide struggle to deliver meaningful benefits for surrounding areas due to weak links with local economies and insufficient policy co-ordination. Understanding the policy frameworks that support these instruments – and the factors that determine their effectiveness – provides valuable insights into how regions like Escuintla can maximise their potential. According to the OECD, more than 7 000 SEZs currently operate worldwide, yet only a fraction makes a significant contribution to regional development (OECD, 2025[1]).

Industrial Parks and SEZs are two key instruments within a broad spectrum of growth poles models aimed at fostering industrial development, enhancing competitiveness, and addressing regional disparities. Alongside Export Processing Zones, Clusters, Smart Cities, and Free Trade Zones, among others, these models are designed to support specific policy objectives, such as boosting manufacturing output, promoting export-led growth, facilitating technology transfer, and stimulating employment generation in lagging regions at both national and regional levels. Governments worldwide have leveraged SEZs and Industrial Parks as catalysts for industrial transition, investment attraction, and job creation (UNCTAD, 2019[2]).

Box 4.1. OECD Free Trade Zone (FTZ) certification scheme

The OECD FTZ Certification Scheme is based on the OECD Recommendation on Countering Illicit Trade: Enhancing Transparency in Free Trade Zones and the attached Code of Conduct for Clean Free Trade Zones. These instruments provide a framework for high-quality governance of FTZ policy framework and provide guidelines to run secure and FTZs while preserving their economic benefits.

Developed in collaboration with governments, industry stakeholders, and international organisations, the scheme establishes clear criteria for FTZs, including:

• Enhanced due diligence and risk management to prevent illicit activities.

• Strict compliance measures aligned with international best practices.

• Transparency and accountability in business operations to foster legitimate trade.

By obtaining OECD certification, FTZs can demonstrate their commitment to clean trade, attract responsible investment, and strengthen their reputation as safe, secure and prosperity-generating trade hubs.

The Certification Scheme is currently in its pilot phase, being tested to assess its effectiveness and ensure its criteria are practical and impactful. The first certification was awarded to Barcelona Free Trade Zone, marking a significant milestone in promoting transparency and compliance in FTZs.

Ongoing work with Costa Rican free trade zones highlights the scheme’s suitability for well-governed, high-tech industrial zones. Costa Rica’s FTZs, which specialise in state-of-the-art high-tech and biotech manufacturing, already uphold strong governance standards, making them prime candidates for certification. The pilot phase has shown that the OECD framework is well-fit for purpose, even for large-scale certifications in complex, high-value industries.

Source: OECD (2019[3]).

Successful Industrial Parks and SEZs require co-ordinated governance across multiple levels of government. OECD research highlights that, regardless of whether a zone is a free trade zone, SEZ, or industrial park, strong governance structures are essential. Robust internal and external oversight helps mitigate potential negative externalities, such as environmental degradation, labour exploitation, and economic displacement. Without proper governance, these unintended consequences can undermine the intended benefits of SEZs and other economic zones, limiting their long-term sustainability and effectiveness (OECD, 2023[4]). Moreover, weak governance and oversight can increase the risk of illicit trade activities within SEZs, particularly in free trade zones where customs control is relaxed. The OECD’s Free Trade Zone (FTZ) Certification Scheme (Box 4.1) proposes a framework to reduce these risks through transparency, due diligence, and closer co-ordination with law enforcement. By balancing the interests of businesses, governments, local communities, and labour groups, well-structured governance supports sustainable and inclusive industrial development. Without such co-ordination, policy inconsistencies and execution gaps can limit these economic zones' full potential.

The role of industrial parks in regional development

Industrial parks are place-based instruments used by countries and regions for fostering regional economic development, innovation, and industrial competitiveness. They are geographically designated areas equipped with shared infrastructure, essential services, and regulatory frameworks that facilitate industrial activities (Kohut, 2023[5]). These parks typically provide essential utilities, transport links, and administrative support, reducing operational costs and improving business efficiency (Ngwu, 2023[6]). By concentrating economic activities, industrial parks contribute to economies of scale, technological upgrading, and more efficient use of land and infrastructure, while also aiming to minimise environmental and social externalities (Kohut, 2023[5]). Unlike informal industrial clusters, industrial parks operate under a single management entity that ensures regulatory compliance, long-term planning, and the provision of essential infrastructure, utilities, and support services. Their structured nature has made them a favoured policy tool for industrialisation, economic diversification, and structural transformation. Governments have used them to address market failures and facilitate a transition from resource-based to manufacturing-led economies. In some cases, they have supported small and medium-sized enterprises, stimulated job creation, and improved access to international markets (Ngwu, 2023[6]). Industrial parks are also expected to help integrate firms into global value chains and promote research and development, though these benefits are not always realised in practice. While industrial parks serve as key instruments in national and regional industrial policies, their effectiveness depends on how they are designed and implemented. Their ability to foster innovation, attract investment, and promote sustainable development is shaped by factors such as regulatory frameworks, infrastructure provision, and long-term planning. Although they offer opportunities for economic development and structural transformation, their broader impact varies depending on the specific context in which they operate (UNIDO, 2019[7]).

Industrial parks can contribute significantly to regional development beyond economic benefits. They can help reduce regional disparities by directing investment towards underdeveloped areas, stimulating local economies, and fostering linkages between industries and communities. Industrial parks also encourage urbanisation by attracting skilled labour and facilitating the development of essential social services such as housing, healthcare, and education. This integration between industry and community is key to ensuring long-term economic resilience and sustainable development (Nylén, Anttiroiko and Tiensuu, 2024[8]).

Industrial parks can take multiple forms depending on policy priorities and economic goals. Industrial parks comprise a variety of typologies designed to meet specific development objectives. These include Eco‑Industrial Parks (EIPs), which focus on environmental sustainability and industrial symbiosis; Agro‑Industrial Parks (AIPs), which support agri-processing and value chains; High-Tech Parks (HTPs), which promote innovation and technology-driven industries; and Industrial Towns, which can evolve into integrated urban-industrial areas combining residential, commercial, and production functions. Some parks also include Border Economic Zones (BEZs) to enhance cross-border trade, and Bonded Zones that allow for the storage and light processing of goods under customs control (UNIDO, 2019[7]).

Industrial parks are undergoing a significant transformation to adapt to the changing economic and environmental landscape. Emerging trends such as digital transformation, green growth, and urban-industrial integration are increasingly shaping their development. Competition for FDI has driven improvements in infrastructure and service provision, while environmental concerns have led many parks to adopt circular economy (CE) principles to reduce waste and enhance resource efficiency. However, as recent case studies show, the implementation of CE within industrial parks often faces significant challenges – including regulatory uncertainty, market immaturity, and tensions between economic and environmental priorities. These realities underscore the need for strategic planning, strong stakeholder co‑ordination, and targeted policy support to ensure that industrial parks can truly become sustainable, inclusive, and competitive drivers of regional development (Nylén, Anttiroiko and Tiensuu, 2024[8]).

SEZs as strategic policy instruments for place-based industrialisation

SEZs, EPZs, and FTZs are regulatory instruments that may overlap with industrial parks but are distinct in nature and purpose. Importantly, policy instruments such as SEZs, Export Processing Zones (EPZs), and Free Trade Zones (FTZs) are not typologies of industrial parks themselves, but rather place-based regulatory frameworks that may be applied within them. These instruments typically offer fiscal and administrative incentives to promote trade, attract investment, or facilitate exports. In some cases, an SEZ, EPZ or FTZ may coincide geographically with the entire industrial park; in others, such regimes are confined to designated areas within a broader park layout. This distinction highlights the flexibility of industrial parks as platforms for deploying various policy instruments in support of national industrialisation goals (UNIDO, 2019[7]).

The concept of SEZ has been widely discussed in economic and industrial development literature, yet no single, universally accepted definition exists. The modern SEZ concept in its current form dates back to the 1950s, when such zones were first established as export processing zones (EPZs) focused on manufacturing for export, and later evolved into various forms of “free zones” (Narala and Zhan, 2019[9]). Different institutions, policymakers, and researchers describe SEZs in varying ways, depending on their scope, function, and objectives. While some definitions focus on their role in economic transformation, others emphasise their contribution to sustainability, innovation, or regional development. Despite the proliferation of terminology, the core principle of an SEZ remains a place-based response aimed at improving economic attractiveness to investors and providing opportunities for local SMEs to integrate into global value chains (OECD, 2025[1]).

SEZs play a pivotal role in modern territorial development policies, serving as place-based industrialisation tools to stimulate industrialisation, enhance regional competitiveness, attract investment and skilled labour. As regions shift towards inclusive, sustainable, and resilient development models, SEZs have emerged as key tools for fostering targeted economic environments. SEZs differ significantly in their regulatory, fiscal, and administrative frameworks. Typically established as designated geographical areas with flexible rules, SEZs offer incentives such as tax exemptions, simplified customs procedures, and streamlined labour regulations. These features make them particularly effective in attracting FDI and promoting trade. In some cases, an SEZ may be fully integrated within an Industrial Park; in others, it operates as a distinct entity. Regardless of their configuration, SEZs are designed to offset business costs, reduce regulatory burdens, and provide secure and efficient environments for enterprise development. Given their widespread adoption and growing policy relevance, SEZs warrant close attention as strategic mechanisms for driving private investment and supporting territorial development goals (OECD, 2023[10]).

The evolution of SEZs has expanded their role beyond manufacturing and export-driven activities. Over the past 40 years, SEZs have evolved significantly, now encompassing a variety of forms, such as technology-driven sectors, logistics, and even finance, beyond their original focus on manufacturing and export-driven activities. This shift demonstrates the adaptability of SEZs to evolving economic landscapes and their potential to support broader development objectives beyond initial job creation or export orientation (Frick and Rodríguez-Posé, 2023[11]). In many emerging economies, contemporary SEZs are no longer solely designed to create jobs but also function as tools for fostering economic growth, diversifying the economy, and facilitating investment. They achieve this by offering high-quality infrastructure and streamlined services that reduce bureaucratic hurdles for investors, often through the establishment of a One-Stop-Shop (OSS) system (OECD, 2023[10]).

The lack of a unified definition and robust data on SEZs undermines efforts to conduct rigorous cross-country comparisons and assess their true policy impact. Conceptualisations of SEZs remain inconsistent across jurisdictions, as different types of zones – distinguished by their form, function, and governance structures – are often grouped under the same label. Policymakers tend to adopt divergent frameworks to emphasise the uniqueness of national SEZ models, while differences in terminology further contribute to this lack of clarity. This definitional fragmentation, combined with limited availability of comprehensive and reliable data, hampers the evaluation of SEZ effectiveness and limits the development of best practices (OECD, 2023[10]). Additionally, existing datasets are fragmented and lack sufficient scope, detail, and geographical coverage, making it difficult to assess long-term impacts on investment, employment, and economic growth (Frick and Rodríguez-Posé, 2023[11]). While SEZs offer customised solutions for economic growth, their variations pose challenges in evaluation, regulation, and policy design. Establishing clear benchmarks for performance assessment remains essential for ensuring their long-term success.

Despite the inconsistent definition and conceptualisation across countries, SEZs are typically characterised by four key criteria:

• Spatial: A clearly designated geographical area within the national territory, either legally defined or administratively designated. In some cases, this can encompass a large portion of the country – for example, Italy's recent shift to a single SEZ (SEZ Unica) replacing the previous eight geographically limited SEZs, now covering all of Southern Italy (Italian Government, 2025[12]).

• Regulatory: A distinct regulatory framework that differentiates SEZs from the broader economy, often encompassing customs and fiscal advantages but potentially extending to other relevant regulations, such as foreign ownership, land access, or employment laws SEZs typically offer a more flexible business environment with streamlined administrative processes. However, ensuring a skilled local workforce remains crucial for long-term competitiveness. Some regions address this by investing in talent development initiatives, such as the Łódź SEZ’s Vocational School of Automation and Robotics, which supports workforce upskilling to meet industry needs (Interreg, 2021[13]).

• Governance of SEZs: A dedicated governance and institutional structure to ensure effective management.

• Amenities: Infrastructure and support services, including physical facilities, service provisions, and various financial or fiscal incentives (UNCTAD, 2019[2]).

SEZs as flexible platforms for trade, industrial policy, and territorial cohesion

SEZs vary depending on the host country’s economic context. While all SEZs aim to facilitate trade and FDI, their scale, objectives, and incentive schemes differ significantly. In countries with limited infrastructure, SEZs often function as self-contained industrial hubs, providing essential services such as housing, transport, and production facilities to address structural gaps. In more advanced economies, SEZs tend to have a narrower focus, often specialising in high-value-added production or logistics while relying on existing infrastructure. Their role extends beyond investment attraction, as they can influence employment, skills development, and integration into global value chains. Many SEZs offer tax incentives, simplified regulations, and dedicated infrastructure to improve business conditions and facilitate market entry (OECD, 2023[10]). In some cases, they help channel investment into less developed regions, as seen in Costa Rica’s efforts outside the Greater Metropolitan Area (Box 4.2) and Chile’s development of the Tarapacá Region through ZOFRI (Box 4.3).

Box 4.2. Costa Rica’s free trade zones and industrial parks: driving sustainable and inclusive growth

Costa Rica’s industrial policy combines Free Trade Zones (FTZs) and non-FTZ industrial parks to attract investment, generate employment, and support regional development. FTZs offer significant fiscal incentives under the Free Trade Zone Regime (FTZR) – including exemptions from corporate income tax, customs duties, VAT, and municipal taxes for up to 12 years non-FTZ industrial parks provide modern infrastructure and services to firms operating under standard taxation, supporting a diverse industrial base.

The FTZR has been a key driver of job creation, generating approximately 251 530 direct and indirect jobs in 2023, with women representing 44% of the workforce. To address regional disparities, Costa Rica adopted a targeted policy (Law No. 10234) to incentivise investment outside the Greater Metropolitan Area (GAM), offering reduced investment thresholds and expanding eligible sectors such as food, healthcare, and sustainable tourism (Asamblea Legislativa de Costa Rica, 2021[14]).

In 2023, 13 of 59 new foreign investment projects were located in peripheral regions, reflecting a 16% year-on-year increase. The Northern Zone in particular is emerging as a strategic hub, supported by renewable energy initiatives and pioneering green hydrogen projects led by Ad Astra Energy, which contribute to Costa Rica’s sustainability and decarbonisation agenda.

Sources: Asamblea Legislativa de Costa Rica (2021[14]), Ministerio de Comercio Exterior & Ministerio de Hacienda (2008[15]), PROCOMER (2024[16]).

Box 4.3. Chile’s regional development policy: The PEDZE experience

Chile’s approach to regional integration illustrates how state-led planning can reduce territorial disparities in remote and underserved areas.

In 2014, Chile launched the Special Development Plan for Extreme Zones (PEDZE), a state initiative designed to address infrastructure gaps and limited access to services and employment in its most geographically isolated regions. Managed by the Ministry of the Interior and Public Security and implemented through SUBDERE (Subsecretariat for Regional and Administrative Development), PEDZE was conceived as a means of reintegrating marginalised territories into the national economy and social fabric.

By explicitly targeting areas often excluded from traditional investment strategies, PEDZE aimed to enhance quality of life while fostering long-term territorial inclusion. In January 2023, Chile replaced PEDZE with a permanent policy framework that transitioned from a temporary support measure to a formal and institutionalised state policy. This new model strengthens the role of regional governments by providing direct funding for critical infrastructure projects – ranging from telecommunications and housing to healthcare and education.

Notably, the Austral Fibre Optic project has become a flagship example of the programme’s ambition to reduce regional inequality through improved digital connectivity. Environmental sustainability and cultural heritage protection are also central to this agenda, particularly in sensitive territories such as the Magallanes Region. Through this sustained commitment, Chile demonstrates how decentralised investment planning can support inclusive and resilient regional development.

Source: OECD (2024[17]).

Attracting investment through a mix of tax incentives, regulatory advantages, and territorial development strategies

A key element of SEZs is the incentive framework designed to attract investors. Governments establish SEZs as instruments of industrialisation and economic policy. SEZs are often used to pilot reforms in customs, labour, and investment procedures, allowing countries to experiment with liberalisation strategies in a controlled environment (Narala and Zhan, 2019[9]). They also serve to attract FDI, develop exports, and create employment, especially in regions lacking competitive infrastructure. These incentives often include tax benefits, such as reduced corporate tax rates, exemptions from customs duties, and VAT waivers. Additionally, SEZs offer regulatory advantages, including streamlined administrative procedures, greater labour law flexibility, and relaxed foreign ownership restrictions. In some cases, investors may also receive in-kind support, such as infrastructure development, utility subsidies, or direct financial assistance. However, while these incentives play a crucial role in fostering investment, they must be carefully structured to prevent tax base erosion. Each country develops legislation to balance attractive incentives with corporate responsibilities, ensuring SEZs contribute to long-term economic sustainability (Akinci and Crittle, 2008[18]). Furthermore, the effectiveness of SEZs varies significantly depending on governance quality, investor confidence in regulatory stability, and the degree of integration with national and regional economies.

SEZs and national objectives. Designed to attract FDI, stimulate exports, and foster industrial growth, SEZs provide businesses with a range of incentives and regulatory flexibilities, especially in regions lacking competitive infrastructure (Akinci and Crittle, 2008[18]). However, there is debate about whether SEZs promote national reform or merely serve as short-term solutions to unemployment and capital shortages (Gómez and Molina, 2018[19]). Poorly planned zones risk becoming enclaves of economic activity that fail to generate broader benefits for adjacent regions and to the overall national economy. To be transformative, zones must integrate with national development strategies and adapt over time to changing comparative advantages, what UNCTAD calls the “SEZ development ladder” (Narala and Zhan, 2019[9]). Moreover, while SEZs help mitigate regional disparities by attracting investment to less-developed areas, they can also create unintended spillover effects on surrounding regions. For instance, increased competition for land and labour within SEZs may drive up costs in neighbouring areas, reducing competitiveness outside the zone. In some cases, SEZs have led to economic displacement, where businesses relocate to benefit from incentives, leaving adjacent regions with job losses and underutilised infrastructure.

The long-term effectiveness of SEZs relies less on generous fiscal incentives and more on strategic investments in infrastructure and human capital that build sustainable, location-specific competitive advantages. Infrastructure development – such as reliable transport networks, energy supply, and digital connectivity – can reduce operational costs and enhance market access, benefiting both SEZs and surrounding areas. However, if infrastructure investments are too concentrated within the zone, adjacent regions may suffer from relative neglect, exacerbating spatial inequalities rather than reducing them. Similarly, while SEZs can facilitate job training and workforce development, there is a risk of labour market distortions if they primarily attract skilled workers from neighbouring regions rather than generating new employment opportunities. The ability of SEZs to foster inclusive growth depends on their integration with broader labour market policies and education systems (Danja and Wang, 2024[20]). Over-reliance on temporary tax incentives to attract firms – especially when used to compensate for weak governance or poor location – can undermine the long-term sustainability of SEZs. Additionally, excessive exemptions may erode public revenues without delivering proportional economic returns. A more effective approach is to link certain benefits to environmental or social performance, encouraging more responsible and sustainable investment behaviour (Akinci and Crittle, 2008[18]).

The need for adaptive SEZ policies that align with national and global goals while reinforcing long-term regional resilience is increasingly recognised. Early zones, especially in labour-intensive sectors, were criticised for poor working conditions, low wages, and environmental degradation. Recent reforms now embed ESG (Environmental, Social, and Governance) standards into SEZ frameworks, requiring companies to comply with global norms (Narala and Zhan, 2019[9]). In Colombia, for instance, FTZs are aligned with sustainable development goals, balancing economic growth and environmental protection (Box 4.4). Moreover, zones offer an opportunity for concentrated enforcement of green infrastructure, like wastewater treatment and renewable energy use (Akinci and Crittle, 2008[18]).

Box 4.4. Sustainable industrial development in Colombia’s free trade zones

Colombia’s Free Trade Zone (FTZ) system has evolved to not only stimulate investment and industrial activity but also to integrate environmental sustainability and culture into its development model. In recent years, the country has aligned its FTZ strategy with broader ecological and circular economy goals, positioning these zones as platforms for both economic competitiveness and responsible industrial growth. Eco-industrial zones – particularly those in Valle del Cauca – demonstrate how Colombia has adopted environmental safeguards and promoted energy efficiency within its free zones, aiming to minimise carbon footprints and improve resource use.

The Palmaseca Free Zone, for example, is equipped with dedicated wastewater treatment facilities and optimised utility systems that reduce environmental impact while supporting industrial operations These efforts are part of a broader push to integrate circular economy principles into zone management, reflecting a shift from purely fiscal incentives to more comprehensive sustainability objectives. Moreover, Palmira’s emergence as an industrial hub has been marked by initiatives that bridge economic and environmental agendas, ensuring that urban development and logistics expansion are balanced with ecological resilience. By embedding green infrastructure, energy-saving technologies, and solar farms, the region is not only enhancing its attractiveness to investors but also contributing to long-term sustainable development targets.

Beyond its role in sustainable industrial growth, Palmira is also investing in long-term economic diversification. One of its most innovative initiatives is the 100-hectare Orange Development Area (Área de Desarrollo Naranja - ADN), which fosters arts, culture, heritage, and technology-driven industries. This initiative aligns with Colombia’s Orange Economy policy, integrating creative industries into urban and economic planning by leveraging cultural assets, entrepreneurship, and innovation. By combining industrial development with the promotion of creative and technology sectors, Palmira is enhancing its economic potential and fostering a dynamic, inclusive, and sustainable growth model.

Source: Ministerio de Ambiente (2024[21]), Zona Franca Palmaseca (2024[22]).

SEZ and industrial parks in Guatemala

According to Frick and Rodríguez-Pose (2025[23]) successful regional policies worldwide demonstrate that a mix of financial and regulatory incentives can effectively stimulate economic activity and investment attraction. In this context, Escuintla can build on its strategic position as a key economic corridor by developing specific incentives for industrial zones and enhancing the role of free trade zones in fostering industrial diversification.

Industrial parks

Industrial parks in Guatemala play a crucial role in attracting investment, generating employment, and driving regional economic growth, with 16 parks currently operating across five regions.1 These parks are strategically located to capitalise on the country’s geographical advantages and are equipped with essential infrastructure to support a range of industrial activities. They typically provide road access, electricity, potable water, telecommunications networks, and security services – creating an enabling environment for business operations. The Guatemala Metropolitan Area (AMCG) hosts five parks, followed by Escuintla and Izabal with four and five respectively, while Zacapa and San Marcos each have one. Developed over time to adapt to evolving market demands, these industrial parks offer both infrastructure and incentives that foster industrial expansion across the country (PRONACOM, 2024[24]).

Environmental sustainability remains a secondary concern in Guatemala’s industrial parks, but recent regulatory and institutional efforts aim to mainstream it into national industrial policy through targeted incentives, legal reforms, and multi-stakeholder co-ordination. For example, Guatemala is developing a system of public and private incentives and has created a specialised working group to design a regulatory framework for Sustainable Industrial Parks (UNIDO, 2017[25]). In addition, the FDI, presented by the Ministry of Economy in June 2020, seeks to attract high-impact FDI that enhances the country’s competitiveness and environmental sustainability (Ministerio de Economía MINECO, 2024[26]). To achieve this, the strategy highlights the need for inter-institutional co-ordination between the public and private sectors. Collaboration with the Ministry of Environment and Natural Resources (MARN) is identified as a key factor in promoting investments supported by clear environmental policies and standards. MARN, in turn, has implemented tools such as the BIAWEB digital platform to streamline environmental licensing procedures, thereby encouraging and accelerating investments that comply with regulations (Comisión Presidencial de Gobierno Abierto y Electrónico Guatemala, 2022[27]).

Public special economic development zones (ZDEEP)

Guatemala has established three distinct types of SEZs to attract investment, facilitate trade, and promote industrial and commercial development. These include ZOLIC (Zona Libre de Industria y Comercio Santo Tomás de Castilla), ZDEEP (Zonas de Desarrollo Económico Especial Públicas), and Free Trade Zones (Zonas Francas) each offering unique benefits tailored to different business needs. ZOLIC is a state-managed free trade zone located in Santo Tomás de Castilla (Box 4.5), while ZDEEPs extend ZOLIC’s benefits to other regions, allowing private investment under government supervision. Free Trade Zones, authorised by the state, primarily support manufacturing and export-oriented businesses. Together, these regimes aim to create a competitive environment for both local and foreign investors (Table 4.1).

Table 4.1. Comparison of Special Economic Regimes in Guatemala: ZOLIC, ZDEEP, and Free Trade Zones

	ZOLIC (Zona Libre de Industria y Comercio Santo Tomás de Castilla)	ZDEEP (Zonas de Desarrollo Económico Especial Públicas)	Free Trade Zones (Zonas Francas)
Legal framework	Established under the Organic Law of ZOLIC (Decree 22-73)	Created under reforms to ZOLIC’s Organic Law (Decree 30-2008)	Established by Decree 65-89 (Free Trade Zone Law)
Governing Authority	Managed by ZOLIC, a decentralised state entity	Authorised and supervised by ZOLIC	Operated by private or mixed-capital entities, authorised by the Ministry of Economy (Ministerio de Economía).
Objective	Promote industrial and commercial activities through a special customs regime	Encourage economic development by attracting investment through fiscal and operational incentives	Facilitate manufacturing and trade for export-oriented businesses
Location	Located in Puerto Santo Tomás de Castilla, Izabal	Can be established anywhere in the country	Can be established anywhere in the country
Types of Activities Allowed	Manufacturing, agro-industry, logistics, tech hubs, and export/import transformation.	Identical to ZOLIC: manufacturing, agro-industry, logistics, tech hubs, and export/import transformation.	- Manufacturing and industrial processing - Commercialisation of goods and services - Warehousing and logistics - Call centres, software, and tech services
Incentives	1. Tax Incentives: - 100% exemption from Income Tax (ISR) for up to 10 years. - 100% exemption from VAT on goods and services used in the zone. - 100% exemption on Import Duties. - Exemption from municipal taxes and stamp duties. 2. Customs & Trade Benefits: - Simplified customs processes. - Free inward/outward movement of goods. - No requirement for currency exchange repatriation.	1. Tax Incentives: - 100% exemption from Income Tax (ISR) for up to 10 years. - 100% exemption from VAT on goods and services used in the zone. - 100% exemption on Import Duties. - Exemption from municipal taxes and stamp duties. ZDEEPs may include additional region-specific incentives (e.g. infrastructure support or fast-track permitting).	1. Tax Incentives: - 100% Income Tax exemption for 10 years. - Exemption from VAT, import duties, and other taxes on raw materials, machinery, and equipment. - Exemption from municipal taxes. 2. Customs Benefits: - Free entry and exit of goods. - No customs duties on imports. 3. Employment Benefits: - Foreign personnel can work with specific permits. - Workers are subject to national labour law.

Source: Based on Congreso de la República de Guatemala (1973[28]) (2008[29]) (1989[30]).

Box 4.5. Free zone of industry and commerce of Santo Tomás de Castilla

The Organic Law of the Free Zone of Industry and Commerce of Santo Tomás de Castilla (ZOLIC) was established by Decree 22-73 of the Guatemalan Congress to promote industrial and commercial activities under a special customs regime. The law defines ZOLIC as a free trade zone where national and foreign companies can operate with tax and customs benefits, aiming to stimulate investment, economic growth, and employment generation. It establishes a governing body responsible for managing the zone and ensuring compliance with national and international trade regulations.

Under this law, businesses operating within ZOLIC benefit from tax exemptions, reduced administrative barriers, and special regulatory frameworks. The law provides a structure for the creation of Public Special Economic Development Zones (ZDEEPs), which are extensions of ZOLIC, allowing multiple locations across Guatemala to enjoy similar benefits. The 2008 amendment (Decree 30-2008) introduced reforms to modernise the legal framework, facilitating greater investment, regulatory transparency, and the expansion of economic activities beyond traditional manufacturing.

To maintain their status, companies within ZOLIC must adhere to reporting obligations, investment commitments, and employment standards. The regulatory framework aligns with Guatemala’s broader economic strategy to attract FDI (FDI) and integrate the country into global trade networks. Through this legal structure, ZOLIC is crucial in fostering industrial and commercial development within Guatemala.

Source: Congreso de la República de Guatemala (2024[31]).

Guatemala’s FTZs operate under a distinct legal framework, focusing primarily on export-driven economic activities. Established under Decree 65-89 in 1989, these zones enable companies engaged in production, commercialisation, and export to function under a special customs regime. Public or private entities can manage FTZ, but they must have designated industrial, service, and commercial spaces under strict customs supervision. Amendments to the FTZ Law in 2016 and 2021 (Decree 6-2021) introduced prohibitions on 25 specific activities, including petroleum and fuel storage, alcoholic beverages, agricultural products, mining, and financial services. These restrictions align with Guatemala’s economic and environmental policies to regulate trade and investment (Córdova and Ríos, 2022[32]). Nonetheless, FTZ still provide significant fiscal incentives, such as a 100% income tax exemption for ten years, VAT exemptions, and import duty waivers on production-related goods and services.

ZDEEPs serve as “decentralised SEZs”, offering fiscal incentives and strategic benefits across Guatemala. Initially regulated under the Organic Law of the Free Zone of Industry and Commerce “Santo Tomás de Castilla” (ZOLIC), a 2008 reform allowed ZDEEPs to be established anywhere in the country. These zones function as extra-customs areas where businesses benefit from tax and customs incentives to enhance industrial and commercial development. Unlike traditional Free Trade Zones, ZDEEPs are not restricted to export-related activities but also accommodate a diverse range of industrial, commercial, and service-oriented operations, creating flexibility for investors and businesses. 

ZDEEPs streamline trade and enhance logistics, supporting both domestic and international supply chains. These zones facilitate the import of goods from national and international sources, as well as exports to both domestic and foreign markets. Designed to promote industrial, commercial, and service-oriented growth, ZDEEPs allow businesses to engage in manufacturing, transformation, commercialisation, storage, packaging, and distribution. These operations enable businesses to maximise cost efficiencies and expand market reach (PRONACOM, 2020[33]). Some uncertainty related to tax advantages may however discourage some investors (Box 4.6).

Box 4.6. ZDEEPs participation at Guatemala’s regional economic development

The expansion of ZDEEPs has been instrumental in Guatemala’s regional economic development, particularly in Escuintla. ZDEEPs must first receive authorisation from ZOLIC, which involves a comprehensive evaluation of the proposed site's compliance with key requirements, including minimum infrastructure standards (such as perimeter security, internal roads, and utility access), operational capacity (such as administrative management, monitoring systems, and logistics capabilities), and adherence to the legal framework established by Decree 22-73. Once ZOLIC grants this authorisation, the zone can begin operations under its oversight. However, to ensure that fiscal incentives – particularly exemptions from income tax, VAT, and import duties – are legally recognised and applicable, the ZDEEP must also obtain formal approval from the Superintendencia de Administración Tributaria (SAT). This dual approval process is essential because only SAT has the legal authority to validate and enforce tax benefits under Guatemala’s national tax regime. Without SAT approval, businesses operating in the ZDEEP risk being denied these incentives and may face legal exposure to retroactive taxation and fiscal audits. Currently, 17 ZDEEPs have been authorised through ZOLIC, with five approved by both ZOLIC and the SAT, while 12 remain exclusively under ZOLIC’s jurisdiction. However, the lack of SAT approval creates legal and fiscal uncertainties for businesses operating in these zones, as tax exemptions may not be fully recognised (CRETEC, 2010[34]; ZOLIC & SEGEPLAN, 2020[35]). This legal ambiguity could discourage investment and expose businesses to retroactive tax liabilities and regulatory audits.

Sources: Congreso de la República de Guatemala (2024[31]), CRETEC (2010[34]), ZOLIC & SEGEPLAN (2020[35]).

Escuintla has emerged as a focal point for ZDEEP development, demonstrating their potential to drive local economic growth. The department hosts eight ZDEEPs, three of which are already operational and authorised by both ZOLIC and SAT: ZDEEP PUMA I, ZDEEP Michatoya Pacífico, and Zona Libre Quetzal. The remaining five – PUMA II, Scali Centroamericana, Mauricio Pacífico, Zona Libre Pacífico, and Synergy Park – have been authorised by ZOLIC and, as of April 2025, are awaiting SAT approval. In addition, Zona Libre Masagué, A1 Nuama ZDEEP, and Kawok are currently in the application process. Covering 5 770 691 square meters, these zones are projected to generate over 100 000 direct and indirect jobs, boosting the region’s economic dynamism. Their activities span storage, fuel distribution, manufacturing, and logistics services, reinforcing Escuintla’s position as an industrial hub (ZOLIC, 2024[36]). However, in order for these ZDEEPs to effectively contribute to territorial development and to meet goal of job creation, integrated spatial planning, robust MLG, and co-ordinated infrastructure and service provision are essential. Without these enabling conditions, the expected economic benefits may not materialise evenly across the region.

Beyond the development of ZDEEPs, it is crucial to highlight the industrial vocation of the department of Escuintla and its municipalities as a key driver for inclusive and sustainable development. This vision has been consistently reflected in their territorial planning instruments. Specifically, municipalities such as Masagua, San José, Escuintla, and Santa Lucía have explicitly incorporated the industrial focus into their Municipal Development Plans (PDM) since 2011, as well as into the more recent Municipal Development and Land-Use Plans (PDM-OT) for 2020–2032 and earlier editions from 2018 and 2019. Emphasising this local effort is essential, as it demonstrates the proactivity and commitment of these communities to economic growth and the orderly industrialisation of their territory (Consejo Municipal de Desarrollo Municipio de San José Escuintla Guatemala, 2019[37]).

Beyond Escuintla, other Guatemalan places are actively pursuing industrial park and ZDEEP developments. Municipalities such as Zacapa have initiated planning and land-use strategies to attract private investment, highlighting a growing national interest in SEZ expansion. These initiatives signal Guatemala’s commitment to fostering a business-friendly environment, leveraging SEZs to enhance industrial output, stimulate job creation, and integrate the country into global value chains.

SEZs are often seen as drivers of economic growth and regional development, but they may come with notable drawbacks. Economic analysis often points to potential unfair competition, stemming from preferential regulatory treatment and fiscal incentives, which can distort market dynamics and create uneven playing fields. Furthermore, negative externalities, such as environmental degradation due to increased industrial activity, social displacement from land acquisition, and the potential for labour exploitation (International Labour Office, 2017[38]), must be carefully considered and mitigated. However, growth poles and similar place-based development tools remain widely used and effective when integrated into comprehensive regional strategies, offering targeted interventions to stimulate growth in specific sectors and areas (Frick and Rodríguez-Pose, 2025[23]).

Moreover, the success of industrial parks and SEZs necessitates the integration of public and private sector efforts as well as effective co-ordination between national and local governments to achieve long-term viability and sustainability (OECD, 2025[39]). The strategic selection of location and a clear understanding of the region's economic potential are indispensable elements for growth pole strategies to thrive. The literature reveals a spectrum of SEZ experiences, from resounding successes to situations where challenges were encountered. Areas with inadequate infrastructure or unfavourable business environments, such as remote regions, have seen these initiatives fail. Examples include Indonesia’s KAPET programme, Sri Lanka’s Hambantota project, and Peru’s SEZs. SEZs focusing only on infrastructure, without addressing wider economic and institutional needs, also struggle. Weak institutional frameworks and insufficient funding often hinder their effectiveness, highlighting the importance of a comprehensive, well-planned approach to regional development (Frick and Rodríguez-Pose, 2025[23]).

Synergy Industrial Park

The Synergy Industrial Park is currently under development in the Escuintla department. The industrial park itself will cover approximately 500 hectares, designed to accommodate logistics and manufacturing companies with access to infrastructure that enhances productivity. Designed to accommodate logistics and manufacturing companies, the park is strategically positioned near major highways such as CA‑9, RN‑14, and CA‑9 South, facilitating connectivity to both national and international markets. Within a future broader industrial development project, the park’s master plan includes not only industrial facilities but also residential and commercial areas, educational institutions, healthcare services, and mobility infrastructure. While these elements contribute to an integrated industrial ecosystem, their implementation will require careful co-ordination with local authorities to ensure that the project fosters inclusive regional development rather than operating as an isolated enclave (Synergy Industrial Park, n.d.[40]).

A strong private-sector partnership underpins the project, yet public sector involvement will be crucial for equitable impact. The Synergy Industrial Park is a joint initiative by Spectrum and Grupo Pantaleon, a major player in Latin America’s sugar industry. Their experience in real estate development and agro-industrial operations provides a strong foundation for the project’s implementation. However, ensuring that the park generates widespread economic benefits will depend on the extent of public-sector involvement and sustained engagement with local communities. Public sector engagement will also be essential to address the limited availability of reliable data on Escuintla’s labour market, including the educational profile and skill levels of the workforce. This information gap constrains investors’ ability to make informed decisions about workforce strategies and training needs. Addressing this issue through improved data collection and analysis will be essential to maximising the park’s employment impact and aligning skills development with industry requirements.

Synergy Industrial Park provides regulatory flexibility through a zoning framework designed to accommodate different industrial needs. Businesses can operate within designated advanced zoning (ZDEEP), which is still in development, non-designated areas (Non-ZDEEP), or under specific regulatory compliance frameworks (2989), depending on their requirements. These classifications allow for varying degrees of logistical and regulatory adaptation. These classifications ensure that businesses can operate within a framework that suits their logistical and regulatory demands. In line with its investment strategy, Synergy aims to attract a range of strategic sectors, including textiles, plastics (particularly packaging and labelling), food and beverage processing, pharmaceuticals, logistics, and auto parts manufacturing. Additionally, the park sees potential in hosting medical device manufacturers, and data centres, taking advantage of the site’s favourable access to water, energy, and fibre-optic infrastructure. However, the achievement of this goals and the effectiveness of the ZDEEP incentives will depend on the park’s ability to provide the necessary infrastructure and services to sustain long-term investor interest.

Environmental sustainability is a stated priority for the park, particularly in energy and water management. Grupo Pantaleon already generates renewable energy from sugarcane waste, contributing to Synergy’s electricity supply, and plans are in place for additional solar energy installations. The park aims to obtain LEED for Communities certification, reinforcing its commitment to low-carbon and circular economy principles. However, long-term sustainability will require systematic monitoring of commitments related to green infrastructure and resource efficiency to ensure that environmental targets are met. Water management is another critical factor. Synergy Industrial Park operates multiple wells and is constructing a wastewater treatment plant. As industrial and residential demands grow, ensuring sustainable and equitable water use will require the development of a transparent governance model involving local authorities and community stakeholders. Establishing mechanisms for dialogue and collaboration will be key to maintaining social support for the park’s development and mitigating potential conflicts over resource allocation.

The project aims to integrate principles of responsible development by balancing industrial growth with potential benefits for surrounding communities. While Synergy Industrial Park is designed to provide a structured environment for logistics and manufacturing operations, it is also envisioned as part of a broader strategy to stimulate regional development and job creation in Escuintla. The inclusion of residential, educational, and commercial components in the master plan reflects an ambition to foster socio-economic integration (Synergy Industrial Park, n.d.[40]).

References

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[31] Congreso de la República de Guatemala (2024), Ley orgánica de la Zona Libre de Industria y Comercio Santo Tomás de Castilla (ZOLIC) – Decreto 22-73 y sus reformas. ZOLIC., https://zolicguate.com/wp-content/uploads/2024/08/Ley-organica.pdf.

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[34] CRETEC (2010), Resolución JD 4334-2010, https://cretec.org.gt/wp-content/uploads/2021/03/resolucionjd.43342010.pdf.

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[1] OECD (2025), Can special economic zones spur regional attractiveness? OECD Cogito, https://oecdcogito.blog/2025/02/28/can-special-economic-zones-spur-regional-attractiveness/.

[39] OECD (2025), Recommendation of the Council on Effective Public Investment across levels of Government OECD/LEGAL/0402, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0402.

[17] OECD (2024), Atractividad regional en el nuevo entorno global: Argentina, Chile y Colombia: Estudio de caso: Regiones de Valparaíso y Magallanes en Chile, OECD Publishing, Paris, https://doi.org/10.1787/3f9e52b1-es.

[10] OECD (2023), “Best practices in investment promotion: An overview of regional state aid and special economic zones in Europe”, OECD Business and Finance Policy Papers, No. 27, OECD Publishing, Paris, https://doi.org/10.1787/0c8e6ca3-en.

[4] OECD (2023), Rethinking Regional Attractiveness in the New Global Environment, OECD Regional Development Studies, OECD Publishing, Paris, https://doi.org/10.1787/a9448db4-en.

[3] OECD (2019), Recommendation of the Council on Countering Illicit Trade: Enhancing Transparency in Free Trade Zones, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0454.

[16] PROCOMER (2024), Régimen de Zona Franca genera más de $5,6 millones en compras locales y emplea a más de 250 mil personas en Costa Rica, https://www.procomer.com/noticia/regimen-de-zona-franca-genera-mas-de-56-millones-en-compras-locales-y-emplea-a-mas-de-250-mil-personas-en-costa-rica/.

[24] PRONACOM (2024), Parques industriales en Guatemala, https://www.pronacom.org/wp-content/uploads/2024/03/PARQUES-INDUSTRIALES-ENERO_compressed.pdf.

[33] PRONACOM (2020), Zonas de desarrollo económico especial pública, https://www.pronacom.org/wp-content/uploads/2020/11/ZDEEPS-.pdf?utm.

[40] Synergy Industrial Park (n.d.), Master Plan, https://synergy.com.gt/en/master-plan.php.

[2] UNCTAD (2019), World Investment Report: Special Economic Zones, https://unctad.org/system/files/official-document/WIR2019_CH4.pdf.

[7] UNIDO (2019), International Guidelines for Industrial Parks, https://www.unido.org/sites/default/files/files/2019-11/International_Guidelines_for_Industrial_Parks.pdf.

[25] UNIDO (2017), Sustainable industrial parks in Latin America and the Caribbean: A strategy for sustainable industrial development., UNIDO, https://www.unido.org/sites/default/files/files/2018-05/Sustainable%20Industrial%20Park%20Latin%20America%20Caribbean_Report_FINAL_2017_1.pdf.

[36] ZOLIC (2024), Nuestras ZDEEP.

[35] ZOLIC & SEGEPLAN (2020), Plan estratégico ZOLIC 2020-2024., https://siplan.segeplan.gob.gt/documentos/5842_73000_PLAN%20ESTRATEGICO%20ZOLIC%202020-2024%20%.

[22] Zona Franca Palmaseca (2024), Ubicación Estratégica, https://www.zonafrancapalmaseca.com/index.php/es/ubicacion.

Note

← 1.  Data from PRONACOM as of November 2023. It is important to note that this figure of 16 includes both operational industrial parks and those that are currently in the project phase, with approximately 3 to 4 not yet having started construction.