Economy of Guatemala

Guatemala's GDP for 2001 was estimated at $20.0 billion, with real growth slowing to approximately 2.3%. After the signing of the final peace accord in December 1996, Guatemala was well-positioned for rapid economic growth over the next several years, though a financial crisis in 1998 limited its ability to achieve its potential growth rates.

Guatemala's economy is dominated by the private sector, which generates about 85% of GDP. Agriculture contributes 23% of GDP and accounts for 75% of exports. 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. Because of Guatemala's continued reliance on coffee exports, the recent downturn in world prices has contributed to Guatemala's relatively slow growth over the past 2 years.

The United States is the country's largest trading partner, providing 35% of Guatemala's imports and receiving 27% 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 Basic 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 Guatemala's benefits under both the CBTPA and GSP were reviewed in 2001. After passage of labor code reforms in May 2001, and the successful prosecution of labor rights violations against banana union workers dating to 1999, the review was lifted.

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

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. The International Monetary Fund approved a program for Guatemala on April 1, 2002 but plans to closely monitor progress toward financial sector reform.

Problems hindering economic growth include high crime rates, illiteracy and low levels of education, and an inadequate and underdeveloped capital market. 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 80% of the population lives in poverty, and two-thirds of that number live in extreme poverty. Guatemala's social indicators, such as infant mortality and illiteracy, are among the worst in the hemisphere. A rural economic crisis caused by drought and low coffee prices hit in 2001, and continued into 2002, causing severe malnutrition among the rural poor. U.S. disaster assistance and food aid was provided to address the crisis, which continues.

GDP: purchasing power parity - $46.2 billion (2000 est.)
GDP - real growth rate: 3.5% (1999 est.), 3% (2000 est.)
GDP - per capita: purchasing power parity - $3,700 (2000 est.)
GDP - composition by sector:
agriculture: 23%
industry: 20%
services: 57% (2000 est.)
Population below poverty line: 60% (2000 est.)
Household income or consumption by percentage share:
lowest 10%: 0.6%
highest 10%: 46.6% (1989)
Inflation rate (consumer prices): 6.8% (1999 est.), 6% (2000 est.)
Labor force: 4.2 million (1999 est.)
Labor force - by occupation: agriculture 50%, industry 15%, services 35% (1999 est.)
Unemployment rate: 7.5% (1999 est.)
Budget:
revenues: $2.2 billion
expenditures: $1.8 billion, including capital expenditures of $NA (2001 est.)
Industries: sugar, textiles and clothing, furniture, chemicals, petroleum, metals, rubber, tourism
Industrial production growth rate: 4.1% (1999)
Electricity - production: 3.785 billion kWh (1999)
Electricity - production by source:
fossil fuel: 38.31%
hydro: 61.69%
nuclear: 0%
other: 0% (1999)
Electricity - consumption: 3.295 billion kWh (1999)
Electricity - exports: 435 million kWh (1999)
Electricity - imports: 210 million kWh (1999)
Agriculture - products: sugarcane, corn, bananas, coffee, beans, cardamom; cattle, sheep, pigs, chickens
Exports: $2.4 billion (f.o.b., 1999), $2.9 billion (f.o.b., 2000)
Exports - commodities: coffee, sugar, bananas, fruits and vegetables, meat, apparel, petroleum, electricity
Exports - partners: US 51.4%, El Salvador 8.7%, Honduras 5%, Costa Rica 3.4%, Germany 2.7% (1998)
Imports: $4.5 billion (c.i.f., 1999), $4.4 billion (f.o.b., 2000)
Imports - commodities: fuels, machinery and transport equipment, construction materials, grain, fertilizers, electricity
Imports - partners: US 42.8%, Mexico 9.9%, Japan 4.8%, El Salvador 4.3%, Venezuela 3.8% (1998)
Debt - external: $4.4 billion (1998 est.), $4.7 billion (2000 est.)
Economic aid - recipient: $212 million (1995)
Currency: quetzal (GTQ), US dollar (USD), others allowed

SOURCES: The World Factbook, U.S. Department of State

Economy of Guatemala

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