Economy of Guatemala
Guatemala is the most populous of the Central American countries with a GDP per capita roughly one-third that of Argentina, Brazil, and Chile. Coffee, sugar, and bananas are the main products. 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. 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. The distribution of income remains highly unequal with 12% of the population living below the international poverty line. 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 2000 was estimated at $19.1 billion, with real growth slowing to approximately 3.3%. 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. Most manufacturing is light assembly and food processing, geared to the domestic, U.S., and Central American markets. 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.
The United States is the country’s largest trading partner, providing 36% of Guatemala’s imports and receiving 40% of its exports. 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.
Guatemala Poverty
Guatemala enjoys the highest GDP in Central America, unequal distribution of wealth and rapid population growth within the nation have given Guatemala one of the highest poverty rates in Latin America. More than 75 percent of the national population lives below the poverty line, and the extent of poverty is even more severe among the rural and indigenous populations. In 1989, about 93 percent of the indigenous population in Guatemala were living in poverty and 91 percent in extreme poverty, whereas only 66 percent and 45 percent of the non-indigenous population were living in those respective conditions. Guatemala’s income distribution is among the most unequal in the world, with the wealthiest 10 percent of the population owning nearly 50 percent of the national wealth and the poorest 10 percent owning less than 1 percent. As a result, there is a very small middle class in Guatemala, and political power rests almost exclusively with elite groups. Land, just like monetary wealth, is concentrated in the hands of the few, making it very difficult for poor rural workers to improve their financial situation, as the amount of land they own or have access to is minimal.
Guatemala Hunger
In Guatemala, the face of poverty and hunger is young, indigenous and rural. Guatemala, with the fourth highest rate of chronic malnutrition in the world and the highest in Latin America and the Caribbean, faces a serious challenge to reduce chronic undernutrition, currently at 49.3% among children under 5.
The situation is worse in rural areas of the country where the indigenous population is concentrated; in the highlands of Guatemala, seven out of ten children under 5 are malnourished.
There are several reasons behind these rates: national health services cover approximately 60% of the country; most of the rural areas lack water and sanitation systems and have a limited access to an adequate diet due to income restrictions. In rural areas, the minimum wage covers around 75% of the basic food basket, and poverty reaches 70% of population.
Additionally, Guatemala is prone to natural disasters: hurricanes, earthquakes, floods and frosts are recurrent events which damage the livelihoods of an unprepared population living in vulnerable areas. In October 2008, Tropical Depression Nº 16 affected four departments of the country. The floods caused the loss of life, housing, crops and communication infrastructures, and affected more than 150.000 people.
