Economy of Guatemala

Economy of Guatemala
Guatemala City
Rank	83rd (2012, PPP)
Currency	Quetzal
Fiscal year	Calendar year
Statistics
GDP	$78.42 billion (2012)
GDP growth	3.1% (2012 est.)
GDP per capita	US$5,200 (2012 est.)
GDP by sector	agriculture 13.0%, industry 23.8%, services 63.2% (2012 est.)
Inflation (CPI)	4.0% (2012 est,CPI)
Population below poverty line	54% (2011)
Gini coefficient	54.1 (2006)
Unemployment	4.1% (2011)
Main industries	sugar, textiles and clothing, furniture, chemicals, petroleum, metals, rubber, tourism
Ease of doing business rank	97th[1]
External
Exports	$9.864 billion (2012 est.)
Export goods	coffee, sugar, petroleum, apparel, bananas, fruits and vegetables, cardamom (2012)
Main export partners	United States 39.2%  El Salvador 11.4%  Honduras 6.8%  Mexico 5.4%  Nicaragua 4.0% (2012 est.)[2]
Imports	$15.57 billion (2012 est.)
Import goods	fuels, machinery and transport equipment, construction materials, grain, fertilizers, electricity, mineral products, chemical products, plastic materials and products
Main import partners	United States 38.4%  Mexico 11.9%  China 8.3%  El Salvador 5.1%  Colombia 4.2% (2012 est.)[3]
Public finances
Public debt	$16.17 billion (31 December 2012)
Revenues	US$5.799 billion (2012 est.)
Expenses	US$7.091 billion (2012 est.)
Economic aid	$250 million (2000 est.)
Credit rating	Standard & Poor's:[4] BB+ (Domestic) BB (Foreign) BBB- (T&C Assessment) Outlook: Stable[5] Moody's:[5] Ba1 Outlook: Stable Fitch:[5] BB+ Outlook: Stable
Foreign reserves	US$6.187 billion (March 2011)[6]
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars

Guatemala is the most populous of the Central American countries with a GDP per capita roughly one-third that of Argentina, Brazil, and Chile.^{[citation needed]} Coffee, sugar, and bananas are the main products.^{[citation needed]} The 1996 signing of peace accords, which ended 36 years of civil war, removed a major obstacle to foreign investment, and Guatemala since then has pursued important reforms and macroeconomic stabilization.^{[citation needed]} On 1 July 2006, the Central American Free Trade Agreement (CAFTA) entered into force between the US and Guatemala and has since spurred increased investment in the export sector.^{[citation needed]} The distribution of income remains highly unequal with 12% of the population living below the international poverty line.^[7] Given Guatemala's large expatriate community in the United States, it is the top remittance recipient in Central America, with inflows serving as a primary source of foreign income equivalent to nearly two-thirds of exports.

Guatemala's Gross domestic product for 1990 was estimated at $19.1 billion, with real growth slowing to approximately 3.3%. Ten years later in 2000 it rose by 1 to 4% and in 2010 it decreased back to 3% (World Bank). After the signing of the final peace accord in December 1996, Guatemala was well-positioned for rapid economic growth over the next 10 years.

Guatemala's economy is dominated by the private sector, which generates about 85% of GDP.^{[citation needed]} Most manufacturing is light assembly and food processing, geared to the domestic, U.S., and Central American markets. In 1990 the labor force participation rate for women was 42%, it increased by 1% in 2000 to 43% and in 2010 it increased at 51%. For men the labor for participation rate in 1990 was about 89%, in 2000 it actually decreased to 88% and in 2010 increased up to 90% (World Bank). In terms of self-employment the percentage for men is about 50% while women take up about 32% (Pagàn 1). Over the past several years, tourism and exports of textiles, apparel, and nontraditional agricultural products such as winter vegetables, fruit, and cut flowers have boomed, while more traditional exports such as sugar, bananas, and coffee continue to represent a large share of the export market.^{[citation needed]}Over the past twenty years the percentage of exports of goods and services has fluctuated. In 1990 it was 21% and in 2000, 20%. It increased again in 2010 to 26%.on the other hand its level of imports of goods and services has continually increased. In 1990 its imports of goods and services was about 25%. In 2000 it increased b by 4% up to 29%, and in 2010 it increased up to 36%. Migration is another important avenue in Guatemala. According to Cecilia Menjivar, remittances are “central to the economy.” These remittances come from men’s migration, to the U.S. in 2004 remittances to Guatemala accounted for approximately 97% (Menjivar 2).

The United States is the country's largest trading partner, providing 36% of Guatemala's imports and receiving 40% of its exports.^[8] The government sector is small and shrinking, with its business activities limited to public utilities—some of which have been privatized—ports and airports and several development-oriented financial institutions. Guatemala was certified to receive export trade benefits under the United States' Caribbean Basin Trade and Partnership Act (CBTPA) in October 2000, and enjoys access to U.S. Generalized System of Preferences (GSP) benefits. Due to concerns over serious worker rights protection issues, however, Guatemala's benefits under both the CBTPA and GSP are currently under review.^{[citation needed]}

Macroeconomic development

Guatemala has become more economically developed and stable from 1990-2011. The annual GDP growth rate for Guatemala in 2000 was 3.6%, 0.9% in 2009, and slightly increased in 2010 to 2.0%^[9][10] The poverty rate in Guatemala in 2006 was 54.8%, while the extreme poverty rate was 26.1% Latin America as a whole had a poverty rate of 33% and an extreme poverty rate of 12.9% in 2009.^[11] The data thus indicate that Guatemala is behind other Latin American countries, in terms of lowering poverty rates, but there has been an increase in economic activity in terms of GDP and development. Guatemala’s HDI increased from 0.462 in 1990, to 0.525 in 2000, to 0.550 in 2005, and 0.574 in 2011.3 Guatemala ranked 131st in HDI in 2011.^[9] Other important human development statistics such as the total fertility rate in Guatemala decreased from 4.8 births per woman in 2000 to 4.2 births per woman in 2006.^[10] During the same period, life expectancy increased from 67.9 years in 2000, to 69.9 years in 2006.^[10]

Globalization and poverty in Guatemala

Globalization is the process of economic integration, political policy exchange, transfer of knowledge and ideas, and exchange of culture.^[12] Guatemala is becoming more globalized and is growing with an annual GDP growth of 5% in 2006, 6% in 2007, 3% in 2008, 1% in 2009, 3% in 2010 and 3% in 2011^[13] but high poverty levels still persist.^[14] Guatemala is the biggest country in Central America and has one of the highest disparities between rich and poor as well as one of the highest poverty levels worldwide, with 54% of the population living below the poverty line in 2006 and 54% in 2011.^[15] According to the United Nations Development Programme (UNDP), the Multidimensional Poverty Index (MPI), which looks at multiple deprivations in the same household in regard to education, health and standard of living, measured that in 2011, 25.9% of the population experience multiple deprivations and another 9.8% are vulnerable to such deprivations.^[9] A human development report also states that the average percentage of multidimensional poverty in 2011 was 49.1%.^[16]

Poor women and unpaid work

In Guatemala in 2010 31% of the female population was illiterate.^[17] In the rural parts of Guatemala, 70.5% are poor, and therefore women are more likely to be poor in the more rural areas.^[18] Gammage argues that women in poor households engage more in domestic tasks and undertake the majority of household maintenance, social reproduction and care work than men.^[19] Similarly, Benería states that the women perform tough work but do not get paid and argues that there is an opportunity cost related, since the women could be paid for different jobs instead.^[20] Unpaid household work is associated with the amount of people in the household, the location, and the availability of labor different to household work.^[18] Unfortunately, this means that women in the more rural parts of Guatemala are greater victims of poverty than the urban women, which is why most poverty is found in the rural parts of Guatemala. Due to this poverty, Gammage has found that many women in the rural parts perform unpaid work.^[19]

Educated women and the labor force

Labor force participation for women was at 51% in 2010, 50% in 2007, and 44% in 2004.^[13] Women have a small pay disadvantage, earning 97% of male wages in most occupations.^[17] If women have a second and/or third educational degree, they are more equal with their male competitors, and there is a small gender inequality. As in many countries, both men and women earn the most if they have a university degree.^[17] The ratio of having a steady income increases after a woman has completed the secondary level of schooling, but decreases again after university.^[20] This means that women earn about the same as men if they both completed the secondary education, but after university, men earn more. The situation changes on the professional level, where women earn more than men.^[17] Men work more hours in all professions, except in the household, because many women have part-time jobs.^[17]

Economic priorities

Current economic priorities include:^{[citation needed]}

• Liberalizing the trade regime;
• Financial services sector reform;
• Overhauling Guatemala's public finances;
• Simplifying the tax structure, enhancing tax compliance, and broadening the tax base.
• Improving the investment climate through procedural and regulatory simplification and adopting a goal of concluding treaties to protect investment and intellectual property rights.

Import tariffs have been lowered in conjunction with Guatemala's Central American neighbors so that most fall between 0% and 15%, with further reductions planned. Responding to Guatemala's changed political and economic policy environment, the international community has mobilized substantial resources to support the country's economic and social development objectives. The United States, along with other donor countries-especially France, Italy, Spain, Germany,Japan, and the international financial institutions—have increased development project financing. Donors' response to the need for international financial support funds for implementation of the Peace Accords is, however, contingent upon Guatemalan government reforms and counterpart financing.

Problems hindering economic growth include high crime rates, illiteracy and low levels of education, and an inadequate and underdeveloped capital market. They also include lack of infrastructure, particularly in the transportation, telecommunications, and electricity sectors, although the state telephone company and electricity distribution were privatized in 1998. The distribution of income and wealth remains highly skewed. The wealthiest 10% of the population receives almost one-half of all income; the top 20% receives two-thirds of all income. As a result, approximately 29% of the population lives in poverty, and 6% of that number live in extreme poverty. Guatemala's social indicators, such as infant mortality and illiteracy, are successively improving, but remain in low growth and are still among the worst in the hemisphere.^{[citation needed]} In 2000 the percentage of girls completing primary school was approximately 52%. That percentage rose in 2010 to about 81%. The completion rate in primary school for boys in 2000 was 63% and rose to 87% in 2010.

In 2005 Guatemala ratified its signature to the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA) between the United States of America and several other Central American countries.^{[citation needed]}

2009 food crisis

In September 2009, Guatemalan President Alvaro Colom declared the lack of food and proper nutrition to be a national emergency. Colom stated that the situation is the combined result of a number of factors, including a severe drought and global warming, which have reduced the domestic food supply, and the Global financial crisis, which has reduced Guatemala's ability to import food. Colom stated that the government will immediately seek assistance from the international community for emergency food supplies.^[21]

A number of international organizations have expressed concern with Guatemala's current economic status in 2009. The United Nations World Food Programme (WFP) and the World Bank reported the following:

• Guatemala has the fourth highest rate of chronic malnutrition in the world and the highest in the Western Hemisphere.
• Approximately 75% of Guatemalans live below the poverty level, which is defined as an income that is not sufficient to purchase a basic basket of goods and basic services.
• Approximately 58% of the population have incomes below the extreme poverty line, which is defined as the amount needed to purchase a basic basket of food.
• Approximately 50% of Guatemalan children under the age of 5 now suffer from chronic undernutrition.
• In the nation's highlands, where many indigenous people live, 70% of children under age 5 are malnourished.^[21]

Agriculture

As of 2013, demand for biofuels has resulted in diversion of land from subsistence agriculture to sugar cane and African Palm plantations. Much of the land is owned by large landlords. Due to legal requirements for production of biofuels in the United States the price of maize, a Guatemalan staple, has risen sharply.^[22]

References

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