Overview

A multi-cultural country, Guatemala has made significant progress in achieving macroeconomic and democratic stability after a 36-year civil war.

As from the signing of the 1996 Peace Accords, Guatemala has made progress in strengthening institutions and opening international markets through several trade agreements.

Guatemala has maintained relatively stable economic growth during recent decades. A prudent macroeconomic management enabled an annual average growth of 4.2% between 2004 and 2007. However, the global financial crisis declined that growth to 0.6% in 2009.

While surges in demand for exports and a moderate fiscal stimulus helped cushion the impact of the crisis, a series of natural disasters hit Guatemala in 2010 and 2011 causing an estimated US$1.8 billion in damages and losses.

In spite of these challenges, Guatemala has huge potential to speed up its economic growth through trade, regional integration and tourism. The country’s economy recovered recently, with a 2.9% growth in 2010; 4.1% in 2011; 3.0% in 2012, and an estimated 3.3% in 2013. The forecasted economic growth for 2014 is 3.4%.

Guatemala is the biggest economy in Central America but is among Latin American countries with the highest levels of inequality, with poverty indicators —especially in rural and indigenous areas— among the highest in the region.

Chronic malnutrition and mother-child mortality rates are also amongst the highest in the region. The Human Development Index (2013) ranks Guatemala 133 among 187 ranked countries and in last place in Central America.

The World Bank study Poverty Assessment in Guatemala showed that the country was able to reduce poverty from 56% to 51% between 2000 and 2006. However, official estimates indicate that poverty rose again to 53.7% in 2011. The situation is particularly difficult in rural municipalities, which account for 44% of the country. There, almost eight out of 10 people are poor, according to the outcomes of the 2011 Rural Poverty Map.

An increasingly important challenge for Guatemala is improving the levels of citizen security. The World Bank report Crime and Violence in Central America: A Development Challenge estimates that crime and violence represent staggering economic costs for the country, equivalent to 7.7 percent of its GDP.

President Otto Perez took office in January 2012, pledging a tough stance on crime and a commitment to strengthen social programs and to promote employment through competitiveness reforms. The political panorama remains challenging for the Executive branch, as it does not have legislative majority and Congress has remained virtually paralyzed.

The main challenges for the government include fostering transparency and inclusive growth, addressing social inequalities and ensuring revenues to finance public spending on education, health and infrastructure, among others.

Last Updated: Apr 09, 2014

Based on consultations with representatives from the civil society, the private sector and the international community and in a coordinated effort with the government, the World Bank prepared the Country Partnership Strategy (CPS) for 2013-2016.

This CPS was also designed in close coordination with the Inter-American Development Bank (IDB) to ensure complementarities and consistency between both institutions.

The 2013-2016 CPS focuses on two strategic objectives:

  • Strengthening public policies for social development
  • Promote inclusive and sustainable growth

These objectives include initiatives to create fiscal space for social spending and improve the transparency and efficiency of social programs, as well as strengthening disaster risk management, improve infrastructure and logistics to facilitate international trade and stimulate the growth of micro, small and medium enterprises.

Two keys issues for Guatemala’s development —citizen security and gender equality— have been mainstreamed in all CPS activities.

The current World Bank portfolio in Guatemala consists of four projects amounting to $204.3 million, with a focus on promoting rural and social development, productivity and governance. These projects are:

Enhancing Micro, Small and Medium Enterprise Productivity: This project will improve the productivity of micro, small and medium enterprises (MSMEs) in Guatemala's tourist and agribusiness sectors. This $32 million project aims to bolster MSME growth by increasing added value, product quality and integration into national and international markets.

Land Administration II: This project aims at securing land tenure in 41 municipalities in the country’s seven departments by providing efficient and accessible land registers and management. As of September 2013, 52,742 plots of land have been registered in the database of the Property Information Register, while 260,000 people have benefitted from the project’s activities.

Project to Support a Rural Economic Development Program: The objective of this project is to improve the competitiveness of rural productive supply chains with strong indigenous participation and to strengthen the institutional capacity of the public entities through the adoption of a territorial management model. Some results from this project include the creation of 200 new productive supply chain partnerships; an increase of US$20.3 million of these partnerships’ total sales, and support for the development of 324 municipal development plans.

Education Quality and Secondary Education: The objective of this $80 million project is to improve access to a quality lower secondary education for low income students, especially indigenous communities, through improved primary education completion rates for overage students, strengthened flexible lower secondary education modalities and better school management.

Last Updated: Apr 09, 2014

Competitiveness Project: This project was instrumental for strengthening the National Competitiveness Program (PRONACOM) and the operational startup of the “INVEST in Guatemala” agency, which succeeded in attracting and facilitating $944 million in new foreign direct investments and the creation of over 24,000 new jobs between 2005 and 2008.

Maternal-Infant Health and Nutrition Project: This project has helped to provide access to basic health and nutrition services for 1,094,000 people, by building or rehabilitating 35 health centers for maternal and child care, training 3,342 health workers in 2010 and 2,011 in 2011, and supporting the preventive nutritional program AINM-C in 142 jurisdictions, among other activities. The maternal mortality ratio was reduced by more than 50% between 2006 and 2012 in the intervention areas, while the percentage of pregnant women who attended to least one prenatal visit increased from 54.2% in 2006 to 89% in 2012.

Public Expenditure Review: This study analyzed the quality of Guatemala’s public expenditures in education, health and citizen security, as well as other sectors. The Public Expenditure Review found that there is room to improve the targeting of social spending, as public education and health expenditures do not benefit regions with the greatest need. Also, the study found a need to boost resources to improve citizen security, especially for preventive programs; police manpower and equipment; improved prosecutors office capabilities; and penitentiary and rehabilitation systems.

Last Updated: Apr 09, 2014


LENDING

Guatemala: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments