Guatemala - Money



Despite its 36-year internal conflict (1960-96) that was characterized by political instability and mass killings, Guatemala maintained a functional economy throughout the second half of the 20th century. The

Exchange rates: Guatemala
quetzales (Q) per US$1
Jan 2001 7.8020
2000 7.7632
1999 7.3856
1998 6.3947
1997 6.0653
1996 6.0495
SOURCE: CIA World Factbook 2001 [ONLINE].

1960s and 1970s brought a healthy dose of economic development to Guatemala, resulting in impressive economic growth figures (average annual growth totaled 5.5 percent over the 20-year span of time). The 1970s in particular proved to be very important economic years, as Guatemala focused its attention on expanding the manufacturing sector in order to soften its dependence on agricultural exports. As a result, manufacturing expanded at an annual rate of more than 6 percent from 1970 to 1979. Like other Latin American countries, Guatemala was adversely affected by the foreign debt crisis of the 1980s; inflation grew to an average annual rate of 16.5 percent, and the nation's foreign debt tripled to more than US$4.7 billion. Nonetheless, Guatemala's economy staged a recovery in the 1990s that brought back healthy rates of growth and inflation. In 1999, the country experienced a mild recession , but the effects are expected to be temporary and surmountable.

The Guatemalan quetzal has never experienced a period of hyperinflation or intensive devaluation like many other Latin American currencies have encountered. Instead, the devaluation of the quetzal in respect to the U.S. dollar has occurred gradually; from 1983 to 2000, for example, the value of the quetzal dropped 70 percent, an average annual rate of slightly more than 4 percent. Despite the relative consistency the quetzal has experienced on the world market, Guatemalan officials are planning to dollarize the economy, eventually eliminating the quetzal in order to implement the U.S. dollar as the official national currency. The first step of the dollarization process took place on 1 May 2001, when the U.S. dollar was first allowed to circulate as legal tender. Guatemalan economists and government officials hope that by adopting the U.S. dollar, they can make Guatemala more attractive to foreign investors and effectively eliminate the phenomenon of currency devaluation. Dollarization should also encourage discipline within the banking sector, which, under the jurisdiction of the Superintendency of Banks, currently functions according to rather loose regulations and has encountered several bankruptcies.

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