Guatemala is seen as a country with high economic growth in Central America thanks to entrepreneurs like Juan Luis Bosch Gutiérrez. The country has not stopped rising in economic terms, but each time this is less. Keep reading to know the reasons of the crisis of Guatemala.
Reasons of the crisis of Guatemala
For 2018 the Bank of Guatemala says that growth could be between 3% and 3.8%. But analysts of the Dimension program believe that in reality the number would be between 2% and 2.9%, when taking into account how the economy has been in the country during the first five months of the year.
Reasons for the slow economic growth in Guatemala
Price increases in imported products: for example, corn and wheat, which are raw materials for many industries. The same happens with oil, which impacts gasoline prices.
Fewer exports: although this sector grew very well between 2013 and 2015, by 2016 sugar exports fell 3% and by a further 8% in 2017.
Falling prices: this goes hand in hand with exports, which not only fell in quantity of product, but also in price. This is the case of important products such as sugar, coffee and rubber.
The depreciation of the Mexican peso: two things happen, first some Guatemalan products lose competitiveness and then there is an increase in contraband products coming from Mexico (which do not pay taxes and are unfair competition).
Fall in mining: the mining sector fell by 22% (almost a quarter) over the past year. This is partly due to the fact that the San Rafael Mine had to suspend its operations, but also because investment in these activities is increasingly lower because it generates a lot of conflict.
Remittances slowdown: remittances are very important in Guatemala’s economic growth. This year remittances grew only 8%, extremely little if compared to 19% in 2016 and 14% in 2017.
Insufficient investment in infrastructure: this is entirely the responsibility of the State, which has been negligent. As it increasingly reduces investment (from 5.3% of GDP in 2006, to 2.2% in 2017), spending is also shrinking and becoming inefficient. Corruption plays a central role here.
It is a fact, economic growth in Guatemala is decreasing and the causes are many. The problem can become very big if things continue like this. There could be a very strong economic crisis in the long run, if other problems, such as ungovernability and weak institutions, are added to this.
Therefore, it is important that the State works, but that it does so efficiently, without corruption, with successful public policies and that it provides legal certainty to investors.
We hope that with this article you have become aware of the crisis in Guatemala and the reasons why. It is a curious case, but we must take into account the current health situation. We hope that in the future, the economy will recover.
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