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Guatemala Country Page.
GDP (2002 est.): $23 billion; ($46.2 billion PPP).
Annual growth rate (2002 est.): 2.2%.
Per capita GDP (2002 est.): $2,068 ($3,700 PPP).
Natural resources: Oil, timber, nickle.
Agriculture (22% of GDP): Products--coffee, sugar, bananas, cardamom, vegetables, flowers and plants, timber, rice, rubber.
Manufacturing (13% of GDP): Types--prepared food, clothing and textiles, construction materials, tires, pharmaceuticals.
Trade (2002): Exports--$2.24 billion: coffee, sugar, cardamom, bananas, fruits and vegetables, petroleum, apparel. Major markets--U.S. 30%, Central American Common Market (CACM) 39%. Imports--$6.08 billion: fuels and lubricants, industrial machinery, motor vehicles, iron, and steel. Major suppliers--U.S. 36%, CACM 11%, Mexico 10%.
Economy of Guatemala
Guatemala's preliminary GDP for 2002 was estimated at $ 23.0 billion, with real growth slowing to about 2.2%, less than the rate of population growth. Growth for 2003 is expected to be similar. After the signing of the final peace accord in December 1996, Guatemala was well-positioned for rapid economic growth over the next several years until a financial crisis in 1998 intervened. The subsequent collapse of coffee prices left what was once the country's leading export sector in depression and had a severe impact on rural incomes. Foreign investment inflows also have been week, with the exception of the privatization of utilities. Potential investors, foreign and domestic, cite corruption, lack of physical security, a climate of confrontation between the government and private sector, and unreliable mechanisms for contract enforcement as the principle barriers to new business. On the positive side, Guatemala's macroeconomic management has been sound under the Portillo administration, and its foreign debt levels are modest. The country subscribed to a standby agreement with the IMF in 2002, which it extended in June 2003 after satisfactorily meeting its targets.
Guatemala's economy is dominated by the private sector, which generates about 85% of GDP. Agriculture contributes 22% 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.
The United States is the country's largest trading partner, providing 36% of Guatemala's imports and receiving 30% of its exports. The government 's involvement sector is small, 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 U.S. Caribbean Basic Trade and Partnership Act (CBTPA), and it enjoys access to U.S. Generalized System of Preferences (GSP) benefits. Guatemala's benefits under both the CBTPA and GSP have periodically subjected to review due to concerns over serious worker rights protection issues. Passage of labor code reforms in May 2001, and the successful prosecution of labor rights violations against banana union workers dating to 1999 were encouraging, and the review that year was lifted. However, there is continuing concern over the failure to prosecute perpetrators of violence against labor leaders and reinstate workers who have been illegally fired.
Current economic priorities include negotiation of a U.S.-Central America free trade agreement, commonly known as the CAFTA. Priorities within the negotiation include eliminating customs tariffs on as may categories of goods as possible; opening services sectors; and creating clear and readily enforceable rules in such areas as investment, government procurement, intellectual property protection, customs procedures, electronic commerce, the use of sanitary and phytosanitary measures to protect public health, and resolution of business disputes. Import tariffs have already been lowered together with Guatemala's partners in the Central American Common Market, with most now under 15%.
Other priorities include increasing transparency and accountability in Guatemala's public finances, broadening the tax base, and completing implementation of financial sector reforms so that Guatemala can comply with the standards of the international Financial Action Task Force for detecting and preventing money laundering.
The United States, along with other donor countries--especially France, Italy, Spain, Germany, Japan, and the international financial institutions--have increased development project financing since the signing of the peace accords. However, donors' support remains contingent upon Guatemalan Government reforms and counterpart financing.
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, about 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. Chronic malnutrition among the rural poor worsened with the onset of the crisis in coffee prices, and the United States has provided disaster assistance and food aid in response.