Guatemala - Future trends

Having finally negotiated an end to its decades-long civil war in December of 1996, Guatemala is currently attempting to construct a peaceful and democratic political environment that will foster greater economic growth and prosperity. This task has proven more difficult than anticipated, partly due to the vestiges of violence and distrust left over from the war and partly because of continuing problems with corruption, a weak justice system, and poor political representation. If such obstacles to functional democratic governance can be overcome and Guatemala can develop a stable and more attractive atmosphere for investment, diversification of exports and economic growth should follow. Even during the period of internal political turmoil from 1960-96, Guatemala's economy experienced growth and manageable inflation rates, suggesting that the opportunities proffered by peace and demilitarization could provide the necessary impetus for economic progress.

Even so, sustaining a healthy and growing economy will require more than the absence of internal conflict and the presence of a more democratic political culture. To achieve the economic stability necessary to be competitive within the global economy, Guatemala will have to exercise fiscal discipline, privatize some of its state-owned companies, liberalize its trade regime, reform its banking sector, and explore new options for production and export. A series of economic liberalization measures initiated under the Arzú administration (1996-99) introduced privatization and lifted restrictions on trade and investment, but the process of liberalization must be embraced and continued by current and future administrations in order to bring about economic stability and progress. In respect to new production and export options, the most promising prospects for economic expansion in Guatemala are the textile and apparel industries, as well as the non-traditional export industries of shrimp farming and cut flowers. Guatemala also has proven natural gas and oil reserves that could attract substantial amounts of capital from foreign or domestic investors.

Poverty and deep-seated inequality have been the most stubborn and devastating economic problems for Guatemala in the past, and they will likely continue to afflict Guatemala, even assuming economic growth and expansion on the national level. Unequal distribution of wealth and land within the country over time has led to the present dire scenario, in which more than 60 percent of the Guatemalan population subsist on less than US$2.00 a day. Because the current political system lacks representation on the left and is dominated by 2 conservative parties (PAN and FRG), the interests of the poor and underprivileged are not likely to receive due attention in the political arena until a viable left-of-center party forms. While some of the policies proposed by President Alfonso Portillo at the beginning of his term (2000-present) would have benefited the working class, they have not been passed into law because of lack of support in Congress. International agencies and foreign governments continue to provide aid to Guatemala for poverty relief and other development initiatives, but these funds are not large enough to significantly mitigate the effects of widespread poverty, unequal distribution of wealth, and a rapidly growing population. Unless Guatemala gives serious political attention to the issues of inequality and population growth, the economic future of Guatemalans will be bleak.