Guatemala Economy Facts
Agriculture has long been Guatemala’s main industry, but today the service sector is the largest. The manufacturing industry has also become an important source of income, as has the increase in tourism. Resources and income in the country are very unevenly distributed and growth is hampered by, among other things, widespread crime and corruption.
Other obstacles to the development of the economy are a low level of education among the population, inadequate infrastructure and a low tax rate.
- Countryaah.com: Major imports by Guatemala, covering a full list of top products imported by the country and trade value for each product category.
The lack of security has helped keep foreign investors at a distance, but in recent years foreign direct investment has increased. Economic policy has been praised by the World Bank, and growth has now been one of the strongest in Latin America for a few years.
Guatemala is an average income country in terms of gross domestic product (GDP) per inhabitant. Yet, more than half of the population lives in poverty because of the oblique distribution of resources. One problem is that the state has failed to collect enough taxes to provide basic community services. Taxes are among the lowest in the world, and despite pressure from international lending and aid agencies such as the IMF and the World Bank, several governments have failed to raise them. The opposition in Congress and business is strong.
Despite repeated attempts by the government to increase tax collection, 2017 was only 10.2 percent of GDP, the lowest level in 20 years and the lowest in all of Latin America, according to the World Bank. Weak institutions also cause the tax fraud to be widespread, the state is estimated to lose about 40 percent of VAT revenue and 60 percent of income tax.
- Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including GTM which represents the country of Guatemala. Check findjobdescriptions to learn more about Guatemala.
Large service sector
Agriculture has traditionally been the most important industry. The sector still employs around a third of the labor force, but its share of GDP and of export revenues has decreased. For a long time, there is also a manufacturing industry that is more extensive than in other countries in Central America.
The largest, however, is the service sector, which accounts for just over 60 percent of GDP and employs close to half of the working population. The most important in this sector is trade and financial services. Tourism has also become an increasingly important source of income. Furthermore, the money that Guatemalans abroad send home is an important financial contribution, which in 2017 amounted to about 11 percent of GDP.
Guatemala’s location between Colombia and the United States makes it an important transit country for drug trafficking. It is estimated that the illegal drug trade accounts for up to eight percent of GDP, and parts of the construction sector are suspected of being financed with drug capital. Money laundering is a problem even if the laws have been tightened.
Drought and famine
The peace agreement in 1996 aroused high hopes of creating sustainable growth. But financial market instability and fluctuations in world market prices of coffee and sugar, among other things, contributed to continued jerky growth. On average, growth was three percent between 1980 and 2012, and that was not enough to raise the living standards of the growing population. The global financial crisis in 2008 hit hard on Guatemalan exports and the flow of money from foreign Guatemalans. Growth nearly stopped altogether, and when drought in 2009 left hundreds of thousands of people at risk of starvation, the government was forced to appeal for aid in the form of food and money from abroad. In 2010, the economy turned up again and growth was 3–4 per cent in the following year.
The previously low government debt increased over a number of years, but since 2010 it has been around 24 percent of GDP, which is a relatively low figure compared to other countries in the region.
FACTS – FINANCE
GDP per person
US $ 4,549 (2018)
US $ 78 460 million (2018)
3.1 percent (2018)
Agriculture’s share of GDP
10.0 percent (2018)
Manufacturing industry’s share of GDP
17.9 percent (2018)
The service sector’s share of GDP
62.9 percent (2018)
4.2 percent (2019)
Government debt’s share of GDP
24.7 percent (2018)
US $ 22,993 million (2017)
US $ 11,079 million (2018)
US $ 18,366 million (2018)
US $ 638 million (2018)
Commodity trade’s share of GDP
39 percent (2018)
Main export goods
clothes, sugar, bananas, coffee, cooking oil, cardamom
Largest trading partner
USA, El Salvador, Honduras, Mexico, China
Colom wins the presidential election
In the second round of the presidential election, Álvaro Colom Caballeros, who belongs to the Social Democratic Party wins the National Union of Hope (UNE). He gets just over 52 percent of the vote against a former General Otto Pérez Molina who is the right-wing Patriotic Party’s (PP) candidate. In the election to the congress, UNE receives support from 23 percent of voters, which is sufficient for 48 of the 158 seats, while Ghana receives 37 seats and PP 30 seats. UNE thus gets far from its own majority. Former dictator Efraín Ríos Montt is voted into Congress and thus regains prosecution immunity.
The Social Democrat wins in the first round of elections
In the first round of the presidential election, Álvaro Colom Caballeros gets 28 percent of the vote. Colom is a candidate for the Social Democratic Party Hope National Union (UNE). Former General Otto Pérez Molina is a candidate for the right-wing Patriotic Party (PP) and receives 23 percent, while 17 percent supports Alejandro Giammattei who is running for the center-right party Great National Alliance (Ghana). Peace Prize-winner Rigoberta Menchú (see Modern History) comes in sixth place among a total of 14 presidential candidates.
Murder of politicians and police officers
Three Salvadoran politicians visiting Guatemala are murdered. Four police officers arrested for involvement in the murder are shortly thereafter murdered in the custody. One of them was the head of the police unit against organized crime. The murders seem to confirm suspicions about police-organized crime and the presence of so-called death patrols in Guatemala. As a result, Interior Minister Carlos Vielmann resigns.