Guatemala’s economy is the largest in Central America. Suffering from the “banana republic” or an unfair distribution of land and wealth, uneven development and dependence on a few export crops and foreign investment. More than half the populations is still unable to meet their most basic food needs. The richest 10 percent takes home nearly 50% of the nation’s income.
The country leads Central America in illiteracy (50% of population). Lowest percentage of children enrolled in school. I hear it all the time, the importance of investing in human capital in speaking of my home city of Indianapolis.
The United Nations (UN) recommends 5-7% of a country’s GDP should be spent on education. In 1980, Guatemala spent 2.4%. In 1990, they spent 1.7% on education and have been hanging at that 2% level ever since.
A brief history in the land of, well… land issues. In the 1500s, during the Spanish conquest, land was confiscated and redistributed. In the 19th Century, indigenous peasants were deprived of much the land that was left to make way for large coffee estates. The Arbenz land reform of 1952 was the first attempt to change the pattern of land ownership to benefit the poor –In which the US interfered, which then led into a 30-year civil war.
Guatemala has one of the smallest tax bases in Latin America, less than 8 percent of GDP. The wealthy pay extremely low taxes. The first Guatemalan president to introduce income tax legislation was Arbenz, who happened to be overthrown days before the Congress was due to approve the bill. Large areas of the country need roads and bridges, in some areas, villagers have to walk up to three days to buy and sell produce, visit a doctor or vote. Gastrointestinal diseases recur as there is no national water system.
The engine of the Guatemalan economy is the private sector.
“Businesses have always been more interested in the international market than in creating an internal market, which would require increasing wages to create consumers.”
Some highlights: Coffee primarily for the US and Europe. The country’s development and infrastructure centered around providing coffee through these channels versus looking at any long-term plan internally. McDonald’s: mostly Guatemalan beef. “Maquila” goods, which include brands Nike, Calvin Klein, Levi-Strauss, Wrangler. The US consumes 90 percent of these goods.
The private sector is well-organized. The Coordinating Committee of Agricultural, Commercial, Industrial and Financial Associations (CACIF) represents over 80 percent of GDP and has more power than any political party in Guatemala. Less than 5 percent of the workforce in Guatemala is organized, a la unions.
Women workers are preferred, not only are they paid less, but they are thought to be passive, hard-working and easily intimidated.
Guatemalans working in La Norte (The United States) send home $350 million to their families (1995 figure). Although on return the elders say their children/grandchildren come back maleados, “ruined”, by influence of the American culture. Coming back to Guatemala wearing Levi’s and Nike’s.
I’m going down to Magdalena, Guatemala in August. I will not be taking shoes with me to give away. I will find a the entrepreneur who walked for three days to have the opportunity to sell shoes and buy a pair from him or her.
If you’ve been to Guatemala I’d love to hear about it. Or if you have any book or documentary suggestions for me, I welcome them.