GUATEMALA

Republic of Guatemala

República de Guatemala

COUNTRY OVERVIEW

LOCATION AND SIZE.

Located in Central America at the southern tip of Mexico between the Caribbean Sea and the Pacific Ocean, Guatemala has a total area of 108,890 square kilometers (42,042 square miles), slightly smaller than that of the state of Tennessee. Belize, Honduras, El Salvador, and Mexico all share land boundaries with Guatemala that total 1,687 kilometers (1,048 miles) in length, while Guatemala's coastline along the Pacific Ocean and the Caribbean Sea totals 400 kilometers (249 miles). Guatemala City, the national capital and home to 2 million Guatemalans, is located in south-central Guatemala, less than 100 kilometers (62 miles) from the Pacific Ocean.

POPULATION.

As of July 2000, Guatemala's population was estimated at 12,639,939. There are approximately 484 persons to every square kilometer of the country (1,253 persons per square mile), making Guatemala the second most densely populated nation in Central and South America. (El Salvador is the only nation in the region with a higher population density.) Guatemala also has an extremely high rate of population growth; if the population were to continue at its current growth rate of 2.9 percent per year, the total number of people living in the nation would double in 24 years. Population projections estimate that Guatemala's population will reach 16,295,000 by 2010. The fertility rate in Guatemala is the highest in Latin America, with an average of 5 children born to each Guatemalan woman during her lifetime. Although the Guatemalan government has officially recognized that the national birth rate is high, it has done little to encourage family planning or birth control among its populace. The reluctance of the Guatemalan government to institute population control policies can be partly attributed to its strong ties with the Catholic Church, while resistance to family planning among the general populace can be partially imputed to the civil unrest of the 1980s, which provoked a distrust of foreign-initiated programs (including family planning programs).

In stark contrast to most Latin American countries, Guatemala has a populace that is concentrated mainly in rural areas. Only 39 percent of its population is urban (though urbanization is accelerating). The sizeable rural population is linked to the large indigenous (Amerindian) presence in Guatemala; persons descended from the Mayan Indians account for 56 percent of the nation's total population, making Guatemala the Latin American nation with the largest indigenous population relative to total population. The other 44 percent of the national population is mestizo (of mixed Amerindian-Spanish descent, also called ladino in local Spanish). Despite the concentration of the population in rural areas, close to 80 percent of physicians are located in the metropolitan area, making health care difficult to access for rural inhabitants. Additionally, water supply and sanitation services reach 92 percent and 72 percent of the urban population respectively, while in rural areas they reach marginally more than 50 percent of the population. These facts betray a broader phenomenon of rural disadvantage that extends to the economic, political, and social realms of Guatemalan life.

OVERVIEW OF ECONOMY

Known for its varied landscape, fertile soil, and tropical climate, Guatemala has its economic roots in the coffee and banana plantations that started up around 1860 and remained the major focus of economic activity for almost a century. Until 1950, coffee and bananas alone accounted for 90 percent of the value of Guatemala's total exports. After World War II, the practice of commercial farming spread, and the production of cotton, sugar, and livestock became an integral part of the national economy. Augmented by mining and manufacturing activity, the economy continued to expand and diversify during the 1960s and 1970s. The debt crisis of the 1980s led to sinking export prices, inflation , and declining product values, but the Guatemalan economy gained new life in the 1990s, particularly after the signing of the 1996 Peace Accords that put an end to Guatemala's 36-year internal conflict. Currently, Guatemala has the highest GDP in Central America and continues to enjoy strong growth rates. The major forces acting upon Guatemala's economy at present are the fluctuating international demand for primary resources, the actions of political elites, and the implementation of liberalization measures (including privatizations , trade and investment reforms, and tax reform).

Guatemala has achieved a fairly good balance between the agricultural, manufacturing, and service sectors of its economy. In agriculture, it is the third largest exporter of coffee in the world and a major exporter of bananas and sugar, while its manufacturing sector depends chiefly on the apparel, construction, mining, and energy industries. The service sector, which composes the largest segment of Guatemala's GDP, embraces telecommunications, tourism, and other technological enterprises. Guatemala, though not a net exporter of petroleum, is the only oil-producing nation in Central America, and the possibility of investing more intensively in oil and natural gas in the future is a viable one. Unfortunately, the infrastructure needed to develop Guatemala's natural resources is sorely lacking at present, with low telephone density, scarce access to electricity, and poor road networks outside of Guatemala City posing impediments to entrepreneurial investments.

The macroeconomic indicators often used to measure a nation's economic status speak well of Guatemala's economy. Inflation and currency devaluation have remained steady (excepting the debt crisis of the 1980s, when they were pushed beyond acceptable levels), the foreign debt of US$4.4 billion is manageable, and the GDP has grown steadily for the last decade, following a period of stunted growth during the 1980s. The political climate is also ripe for foreign investment, as the war between the Guatemalan government and the Guatemalan National Revolutionary Unity (URNG) guerrilla group came to an end in 1996. Recent privatizations have lessened the role of the government in the Guatemalan economy, easing the financial burden on the state and providing an immediate source of income from the sale of the previously state-owned enterprises. Furthermore, the government has adopted plans to dollarize its economy, following the path taken by other Latin American countries, including Ecuador, El Salvador, and Panama. Dollarization (the adoption of the U.S. dollar as the official monetary unit by another country) is generally viewed in a positive light by foreign investors, as it holds interest rates to lower levels and promises to eliminate devaluation.

While macroeconomic indicators paint a hopeful picture of Guatemala's economic situation, the conditions that exist within the nation provide far less cause for optimism. Poverty and inequality are endemic in Guatemala and are linked to the nation's other socio-economic problems, which include an inadequate education system, widespread health and sanitation deficiencies, and high rates of crime and violence. These issues have contributed to political turmoil in the past, and while Guatemala is no longer plagued by civil war, there is still great unrest and tension within the nation that could threaten political and economic stability in the future. International agencies and foreign governments are dispensing aid to Guatemala more willingly now than during the nation's civil war, but these funds are not large enough to promote change in a system that is deeply rooted in unequal distribution of land and wealth.

POLITICS, GOVERNMENT, AND TAXATION

Guatemala is a constitutional democratic republic that is divided into 22 departments and governed by a 3-branch system, consisting of the executive, legislative, and judicial. The legislative branch consists of the National Congress, a 1-house legislature composed of 116 members, while the judicial branch is headed by the Supreme Court of Justice. The president serves as both the chief of state and the head of government and has the authority to appoint departmental governors and cabinet members.

Current president Alfonso Portillo of the Guatemalan Republican Front (FRG) was elected by a landslide victory in his December 1999 campaign against candidate Oscar Berger of the National Advancement Party (PAN). The FRG and the PAN are the 2 major political parties active in Guatemala today; a third party, the New Nation Alliance (ANN), plays a minor role in the nation's political races. The PAN (the party to which Portillo's predecessor Alvaro Arzú belonged) is conservative and business-oriented while the FRG is conservative and populist, at least according to the platform Portillo used to win the presidency. Both parties support rigorous economic programs that put emphasis on fiscal discipline and macroeconomic stability, but Portillo and the FRG also support policies that work to the benefit of economically disadvantaged Guatemalans. Among the policies proposed by Portillo during his first year as president were a hike in the minimum wage, the decentralization of political power, and others with similar populist themes. However, Portillo's proposals were not met with a spirit of cooperation in Congress, and little has been done to better the situation of the poor since he took office in early 2000.

The Guatemalan government traditionally has not exerted a great amount of control on the economy through regulations or other interventionist measures, preferring to keep its involvement minimal, as evident in the fact that the private sector generates more than 85 percent of the GDP. This hands-off approach has been bolstered by recent decisions to privatize the state telecommunications, electric generation, and electric distribution companies, as well as by new policies that lift restrictions and regulations on trade and investment in Guatemala. The government has also been frugal in its support of public and social programs; Guatemala's education and health systems leave much to be desired, often to the detriment of disadvantaged Guatemalans.

The tax system is currently undergoing reform as the Guatemalan government attempts to make taxation a more lucrative tool. In 1996, Guatemala's tax revenue accounted for just 8 percent of its GDP, putting it at the second lowest rate in the Western hemisphere. The peace accords signed in 1996 called for an increase that would bring tax revenues up to 12 percent of the GDP by 2000, providing greater funding for social programs. Unfortunately, the parties who signed on to this fiscal pact (government, social organizations, and business leaders) have not all given it their steadfast support, and tax revenues for 2000 only amounted to slightly more than 10 percent of the GDP. Among the taxes on which Guatemala relies for revenue are customs duties , sales taxes, and excises on liquor and tobacco. Additional taxes under discussion for reform or implementation in Guatemala currently include the value-added tax and new taxes to be applied to a variety of industries.

INFRASTRUCTURE, POWER, AND COMMUNICATIONS

An underdeveloped infrastructure is one of the main obstacles to investment and economic development in Guatemala. Public and private investment is disproportionately concentrated around Guatemala City because of the lack of infrastructure connecting the capital to other regions of the country. Not only is much of Guatemala's 12,795 kilometer (3,519 mile) highway network in poor condition, its electricity and telephone density is low, and all of its television stations and newspapers are concentrated in Guatemala City. Additionally, 3 ports (Champerico, Puerto Barrios, and San Jose) handle the bulk of Guatemalan exports, and La Aurora Airport is the only national airport with full capacity for both freight and passengers. These facilities are approaching their breaking points and will need to be expanded soon in order to keep up with growing trade and travel. Overall, major renovation of the country's infrastructure is necessary if trade is to continue uninterrupted.

Telephones are not as available in Guatemala as would be desirable for the purposes of business and general efficient communication. There were 430,000 main telephone lines installed in Guatemala in 1997, but this number still left Guatemala trailing several Central American countries in proportionate terms. Use of cell phones is growing at a remarkable rate, having increased by 2,047 percent between 1993 and 1997, while the number of regular phone lines in the nation increased by only 86.1 percent during the same span of time. In 1998, the government decided to privatize the state telephone company along with several other enterprises. So far, the privatization has not brought about as much progress in infrastructure as outside investors had hoped; the U.S. Department of State's FY 2000 Country Commercial Guide: Guatemala states, "It is not clear that the new owners of the recently privatized telephone company will undertake the investment needed to extend basic telephony to those areas currently underserved."

Electricity has also undergone significant changes due to recent privatizations. Both the major state electricity distribution company and selected assets of the state-owned electricity production company were auctioned off to private bidders in 1998, provoking anticipation of higher electricity prices but also feeding hopes of improved service, mainly among businesses and professionals.

ECONOMIC SECTORS

Guatemala's economy, while still largely dependent on the income and employment provided by the agricultural sector, has been successful in developing its manufacturing and service sectors, thereby remaining competitive within the global market. Among the products and

services most important to Guatemala's economy are coffee, sugar, cotton, bananas, apparel, food processing, and tourism. Some of these industries date back to the early post-independence era, while others are just beginning to blossom. Tourism, for instance, was severely impeded until recently, when the Guatemalan peace accords were signed and the process of demilitarization commenced.

A look at Guatemala's economic sectors over the past thirty years shows that while there has been movement between the agricultural, industrial, and service sectors, that movement has not been uni-directional. Instead, the only well-established pattern seems to be the gradual decrease in agriculture's contribution to the GDP. This trend away from agriculture is generally viewed by development economists as a positive occurrence, since prices of agricultural products on the international market are subject to sharp, sudden declines and can create economic instability. Overall, the structure of Guatemala's economy is stable and fairly well balanced, providing it with a necessary foundation for expansion in the future.

AGRICULTURE

Although Guatemala is trying to expand its manufacturing activities to reduce economic dependence on agriculture, the agricultural sector is a crucial component of Guatemala's export and domestic economies, accounting for 23 percent of GDP (US$11 billion) in 1999 and employing 50 percent of the labor force (1.7 million workers).

COFFEE.

One of Guatemala's original commercial developments in the 19th century, coffee production is still of vital importance to the national economy. In 1998, coffee exports brought in US$586.3 million, almost double the amount of sugar, the next most profitable agricultural export. Guatemala's production of coffee is equally important in the global economy, as Guatemala is the world's third largest exporter of coffee. Because large-scale operations are needed to produce vast quantities of coffee for export, most Guatemalan coffee is harvested at large plantations along the southern border of the highlands.

SUGAR.

After coffee, sugar is Guatemala's most profitable crop, earning US$315.3 million on the world market in 1998. Sugar has also shown promise as an expanding industry in Guatemala, particularly because it can be produced in raw form or processed within the country prior to export, augmenting its value.

BANANAS.

Bananas remain one of Guatemala's top agricultural exports, grabbing US$190.4 million in revenue in 1998. Like other developing countries that export bananas, Guatemala has recently encountered problems on the international market, including declining prices and a European Union policy that places new restrictions on its imports of bananas. Additionally, conflicts between Guatemalan banana workers and the companies that contract them have led international fruit companies to move their headquarters from Guatemala to Ecuador, where labor is unorganized and therefore cheaper. All of these factors have contributed to the recent decline of the banana industry in Guatemala.

INDUSTRY

Industry in Guatemala, which includes food processing, publishing, mining, and the manufacture of textiles, clothing, cement, tires, and pharmaceuticals, comprises 20 percent of the GDP (US$9.6 billion) and employs about 15 percent of the total workforce (500,000 workers). After growing steadily during the 1960s and 1970s, manufacturing slowed during the debt crisis of the 1980s but picked up again during the 1990s.

TEXTILES AND APPAREL.

More than 80,000 Guatemalans are currently employed by the apparel industry, most of whom are young women. The apparel industry has experienced growth over the past decade, but international attention directed to the poor working conditions within apparel-for-export factories or maquilas has resulted in the closing of some major plants, including the Phillips-Van Heusen factory that used to be located in Guatemala. So long as labor remains cheap and accessible in Guatemala, the apparel industry is likely to continue expanding. The United States provides a sizeable market for Guatemala's apparel exports, importing more than US$1 billion worth of apparel in 1998 alone.

MINING AND OIL.

Combined with production of energy (mainly from petroleum), mining contributes roughly 3 percent of Guatemala's GDP. Antimony, copper, nickel, iron, and tungsten are all mined in Guatemala, though not in great quantities. Surveys of Guatemala's subsurface have revealed that the nation has a wealth of mineral resources, indicating that, given the right investment interest, mining could become a more prominent part of Guatemala's economy in the future. Guatemala, the only oil-producing country in Central America, has been extracting oil from its Petén Basin since the early 1980s, though it does not extract nearly enough to be a net exporter of petroleum.

SERVICES

TOURISM.

The service industry contributes the largest segment of Guatemala's GDP (57 percent, or US$27.3 billion) and employs about 35 percent of the nation's total workforce (1.2 million workers). While the service sector encompasses several different industries like retail , financial services, transportation, and computer services, the most profitable component is tourism. Because of its agreeable climate and diverse landscape, as well as its Mayan ruins, Guatemala is becoming a popular travel destination in the post-conflict period. In light of the high profit margins associated with tourism receipts, the government is making solid efforts to expand tourism and attract more foreign visitors to Guatemala.

INTERNATIONAL TRADE

The United States, Latin America, and Europe are the most frequent destinations for Guatemala's exports, composing 51.5 percent, 26.6 percent and 11.3 percent

of the export market respectively in 1998. In addition to its membership in the Central American Common Market trade group, Guatemala also holds free trade agreements with Panama, Chile and the Dominican Republic. Guatemala exports a wide variety of products with a mainly agricultural base, while it imports goods of an industrial nature, including machinery, road vehicles and apparel. This combination of exports and imports reflects Guatemala's position as a developing country that must rely partially on outside advancements to sustain and promote industrial activities within its own economy. As Guatemala becomes more developed and expands its manufacturing sector, it should depend less on industrial imports from the United States and other developed nations.

Guatemala has consistently imported more than it has exported over the past 25 years, but this trend has sharpened over the past 5 years or so, with imports surpassing exports by significant margins and resulting in a considerable trade deficit . In 1998, Guatemala exported only US$2.582 billion worth of goods while importing US$4.651 billion worth. Increasing imports can be a sign that the Guatemalan economy is strong enough to afford large quantities of goods from abroad, but they can also throw off the stability of the nation's trade regime if not matched by growth in exports.

The unprecedented level of Guatemala's imports in 1998 might also be a result of the end of la violencia, or the civil war, in 1996. The political space created by the peace agreement may have encouraged deeper interaction between Guatemala and the global market and may have opened up new trade opportunities with economic players who had previously withheld their trade partnership as a political gesture.

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

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.

POVERTY AND WEALTH

Although 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.

While the economic policies implemented during the 1990s in Guatemala produced manageable inflation rates and healthy economic growth, they did not bring about greater economic equality or help to reduce poverty. Economic reforms in Guatemala have been aimed at improving macroeconomic indicators, sometimes to the disadvantage of social spending, as with the reduction of the public sector deficit from 1990 to 1996, which was accomplished through spending cuts. Although some government leaders (such as current president Alfonso Portillo) have run for office on populist platforms, little has been done to improve the situation of the poorest segments of the population.

The poor in Guatemala do not have easy access to good health care, particularly because health-care facilities and experts are focused in metropolitan areas. This factor, combined with the negative health effects of pesticides and the low availability of drinking water and waste disposal services in rural areas, results in a higher

occurrence of health problems in rural areas than in urban centers. There are signs that the issue of health care has started to receive greater political and social attention in Guatemala. In 1996, about 13 percent of the government's budget was devoted to health, whereas in 1992 the amount allocated for health care was only 6.6 percent of the overall budget. Additionally, the government recently initiated a health sector reform to provide health services to all Guatemalans who currently lack access to health care; the minimum health services available under this plan include care of pregnant women, child health care, and emergency and disease care.

Education presents another problem for poor Guatemalans, as some parents call on their children to work long hours to contribute to the family income, preventing them from attending school. This phenomenon occurs most often in rural areas, where families engage in subsistence farming or work for larger landowners, and the amount of manual labor available determines a family's total income. Unfortunately, children who have to work instead of attending school miss out on the education that is almost always necessary for economic advancement. Although school attendance is compulsory for 6 years by government mandate, only 41 percent of school-aged children in Guatemala attend classes, and only 55.6 percent of the total population are literate.

WORKING CONDITIONS

The conditions under which most Guatemalans work are less than desirable and often in violation of Guatemalan law. According to the nation's labor laws, the minimum daily wage is US$3.00 for agricultural workers, US$3.30 for workers in commerce, US$3.38 for construction workers, and US$6.00 for specialized labor. The workweek consists of 44 hours for day-shift workers and 36 hours for night-shift workers. Overtime work is to be compensated with time-and-a-half pay, and children under the age of 18 are not to work overtime. In terms of workplace conditions, employers are to ensure healthy and safe environments for their workers by providing adequate bathroom facilities and on-hand medical care. If 25 percent of the employees at a given workplace request to organize a trade union, they have the right to do so freely.

Work conditions in Guatemala's agricultural and industrial sectors often fail to meet the government's specified requirements. More than 80,000 Guatemalans, most of them young women, work at maquilas (apparel-for-export factories), often in unsafe and unhealthy (not to mention illegal) conditions. Among the labor law violations common to maquilas are forced overtime, employment of children as young as 13 years old, and bathrooms that remain locked for most of the workday. Equally poor conditions exist for workers in the agricultural sector, where the need to meet daily quotas leads to the coercive employment of children as young as 6 years old by their parents, who do not receive compensation unless they reach the fixed quota. Much agricultural employment is seasonal and occurs at off-site locations, where housing facilities are generally poor; at some cotton plantations, the housing provided for workers consists of bare wooden constructions without bedding or furniture. Wages for agricultural and industrial workers often fail to meet minimum wage requirements, and average income is sometimes less than the cost of a basic food basket for a family of 5, meaning that wages are set at starvation levels.

Despite the treacherous conditions that exist for unskilled workers, fewer than 15 percent of all workers are unionized. This fact has much to do with the abuses that have been committed against trade union members and leaders over the past half-century. Military and civilian governments since the 1950s have held union organizations in contempt and have committed serious human rights abuses and "disappearances" against union leaders. Amnesty International has documented that between 1976 and 1996 (the final 20 years of Guatemala's internal war), thousands of trade unionists were tortured and killed, or "disappeared," because of their union activities. This hostile attitude towards labor organizations continues today and acts as a significant deterrent to trade union mobilization.

One major reason that work conditions are so poor and unions so weak is that work is hard to come by in Guatemala. While open unemployment affects about 7 percent of the population, total unemployment lingers around 37 percent; as a result, close to 1 million Guatemalans work in the informal economy , augmenting the formal economy's workforce of 3.5 million. Additionally, the culture of violence that developed during Guatemala's civil war has not yet been eliminated, so threats and coercion are common workplace elements. Not all forms of employment in Guatemala are undesirable; jobs in urban areas and in the service sector provide stable and healthy conditions and livable wages. Too often, however, working conditions do not correspond to the standards set by the Guatemalan government, and of the groups impacted by this disregard for labor laws, unskilled, rural workers suffer the gravest consequences.

COUNTRY HISTORY AND ECONOMIC DEVELOPMENT

1524. Pedro de Alvarado of Spain invades Guatemala.

1528. Alvarado defeats Guatemalans, and Spanish rule begins.

1786. Spaniards separate Chiapas, Honduras, and Nicaragua from the province of Guatemala.

1821. Guatemala, along with Central America, declares its independence from Spain.

1823. Guatemala joins with other nations to form the United Provinces of Central America.

1840. Guerilla group led by Rafael Carrera overthrows president of United Provinces, resulting in the abolition of the federation.

1850s. Guatemala embarks upon a long period of un-democratic rule, marked by a series of dictatorships, military governments, coups, and insurgencies that continue until the mid-1980s.

1901. United Fruit Company establishes itself in Guatemala, becoming the first transnational corporation in the country.

1944. The "October Revolutionaries," a group of students, liberal professionals, and military dissidents, overthrow General Jorge Ubico's dictatorship.

1945. Guatemala joins the United Nations.

1948. Guatemala joins the Organization of American States.

1952. Communist Guatemalan Labor Party gains legal status and institutes agrarian reforms that distribute unused lands to peasants.

1954. U.S. CIA deploys "Operation Success" with help from domestic forces, invading Guatemala and overthrowing President Jacobo Arbenz.

1960. Rebel Armed Forces (FAR) forms; civil war over economic and land issues commences.

1966. United States sends in Green Berets and directs counterinsurgency campaign in Guatemala; Mano Blanca and other Guatemalan death squads form.

1970s. Manufacturing expands markedly in Guatemala, growing at an annual rate of 6.2 percent.

1978. United States bans the sale of arms to Guatemalan government.

1980. Spain breaks off diplomatic relations with Guatemala after a government massacre in which Indian protestors were burned inside of the Spanish Embassy. Debt crisis strikes Guatemala; high inflation and foreign debt accumulation ensue.

1981. Guatemalan army initiates counteroffensive, destroys over 400 Indian villages in 2 years.

1982. Guerrilla Army of the Poor (EGP), Organization of Armed People (ORPA), and Rebel Armed Forces (FAR) combine to form the Guatemalan National Revolutionary Unit (URNG). Efrain Rios Montt overthrows General Angel Anibal Guevara presidency.

1983. Military overthrows Rios Montt. United States resumes sale of arms to Guatemala.

1985. Marco Vinicio Cerezo is elected, becoming the first civilian president in 15 years. United States reinstates official economic and military aid to Guatemala.

1987. Central American Peace Accord is signed.

1990. United States again cuts off military aid and arms sales to Guatemala.

1991. Economic recovery begins; Guatemala regains healthy inflation rates and experiences consistent growth.

1994. Guatemalan government and guerrillas sign agreements on human rights, resettlement, historical clarification, and indigenous rights. United Nations Human Rights Verification Mission in Guatemala (MINUGUA) is formed.

1996. Alvaro Arzú, member of National Advancement Party, is elected president. Guatemalan government and guerillas sign peace accord, ending 36-year conflict.

1997. URNG demobilizes and becomes political party.

1999. Alfonso Portillo, member of Guatemalan Republican Front, is elected president.

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.

DEPENDENCIES

Guatemala has no territories or colonies.

BIBLIOGRAPHY

Banco de Guatemala. "Guatemala: Algunas variables macroeconomicas, años 1950-1999." <http://www.banguat.gob.gt/ver.asp?id'/indicadores/hist03>. Accessed March 2001.

BASICS/USAID. "Guatemala: Country Achievement Summary."<http://www.basics.org/summaries/Guatemala.htm>. Accessed January 2001.

Canadian Foundation for the Americas. "Guatemala Under the FRG: Peace at a Crossroads." <http://www.focal.ca/images/pdf/guatemala.pdf>. Accessed March 2001.

Country Watch. "Guatemala: Economy." <http://www.countrywatch.com/files/069/cw_topic.asp?vCOUNTRY=069 &TP=ECO>. Accessed March 2001.

Pan American Health Organization. "Guatemala: Basic CountryHealth profiles, Summaries 1999." <http://www.paho.org/English/SHA/prflgut.htm>. Accessed February 2001.

Population Reference Bureau. "2000 World Population DataSheet: Central America." <http://www.prb.org/pubs/wpds2000/wpds2000_CentralAmerica.html>. Accessed March 2001.

USAID Bureau for Latin America and the Caribbean. Latin America and the Caribbean: Selected Economic and Social Data. Washington, D.C.: USAID, 1999.

U.S. Central Intelligence Agency. "The World Factbook: Guatemala." <http://www.cia.gov/cia/publications/factbook/geos/gt.html>. Accessed February 2001.

U.S. Department of State. "Background Notes: Guatemala." <http://www.state.gov/www/background_notes/guatemala_0500_bgn.html>. Accessed March 2001.

—Heidi Jugenitz

CAPITAL:

Guatemala City.

MONETARY UNIT:

Quetzal (Q). One quetzal is equal to 100 centavos. There are coins of 1, 5, 10, and 25 centavos, as well as paper bills in the amounts of 50 centavos and 1, 5, 10, 20, 50, and 100 quetzals.

CHIEF EXPORTS:

Coffee, sugar, bananas, fruits and vegetables, meat, apparel, petroleum, electricity.

CHIEF IMPORTS:

Fuels, machinery and transport equipment, construction materials, grain, fertilizers, electricity.

GROSS DOMESTIC PRODUCT:

US$47.9 billion (purchasing power parity, 1999 est.).

BALANCE OF TRADE:

Exports: US$2.4 billion (f.o.b., 1999). Imports: US$4.5 billion (c.i.f., 1999).