Economy of Guatemala

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Economy of Guatemala

Currency	Guatemalan quetzal
Fiscal year	Calendar year
Trade organisations	CAFTA
Statistics
GDP	$56.5 billion(2003 est.)
GDP growth	2.1% (2007)
GDP per capita	US$ 5.000 (2007)
GDP by sector	agriculture: 22.5% industry: 18.9% services: 58.5% (2006 est.)
Inflation (CPI)	5.5% (2007)
Population below poverty line	29% (2005)^[1]
Gini index	54.1 (2006)
Unemployment	3.3% (2005)
Main industries	coal, machine building, armaments, textiles, footwear and apparel, petroleum, cement, chemicals, fertilizers, toys, food processing; transportation equipment, including automobiles and ships, electronics, telecommunications equipment, real state, brewing, tourism
External
Exports	$2.763 billion f.o.b. (2003 est.)
Export goods	transport equipment, footwear, coffee, automobiles
Main export partners	US 56.7%, El Salvador 10.8%, Nicaragua 3.6% (2003)
Imports	US$ 140.7 billion (2007)
Import goods	machinery, electrical and transport equipment, chemical products, oil, automotive parts, electronics
Main import partners	US 34.1%, Mexico 8.8%, South Korea 7.8%, El Salvador 6.4%, China 4.6% (2003)
Public finances
Public debt	$4.957 billion (2003 est.)
Revenues	US$0.00
Expenses	US$0.00
Economic aid	$250 million (2000 est.)
Credit rating	US$0.00
Foreign reserves	US$0.00
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-half 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 about 29% of the population below the poverty line.^[2] Other ongoing challenges include increasing government revenues, negotiating further assistance from international donors, upgrading both government and private financial operations, curtailing drug trafficking and rampant crime, and narrowing the trade deficit. 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 41% of Guatemala's imports and receiving 34% 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.

[edit]Economic priorities

Current economic priorities include:

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.

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.

[edit]2009 Food Crisis

In September 2009, Guatemalan President Alvaro Colom has 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.^[3]

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.^[3]