Economy of Guatemala

Economy Of Guatemala

Guatemala is the most populous of the Central American countries with a GDP per capita roughly one-third that of Argentina, Brazil, and Chile. Coffee, sugar, and bananas are the main products. The 1996 signing of peace accords, which ended 36 years of civil war, removed a major obstacle to foreign investment, and Guatemala since then has pursued important reforms and macroeconomic stabilization. On 1 July 2006, the Central American Free Trade Agreement (CAFTA) entered into force between the US and Guatemala and has since spurred increased investment in the export sector. The distribution of income remains highly unequal with 12% of the population living below the international poverty line. Given Guatemala's large expatriate community in the United States, it is the top remittance recipient in Central America, with inflows serving as a primary source of foreign income equivalent to nearly two-thirds of exports.

Guatemala's Gross domestic product for 2000 was estimated at $19.1 billion, with real growth slowing to approximately 3.3%. After the signing of the final peace accord in December 1996, Guatemala was well-positioned for rapid economic growth over the next 10 years.

Guatemala's economy is dominated by the private sector, which generates about 85% of GDP. 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 40% of its exports. The government sector is small and shrinking, 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 United States' Caribbean Basin Trade and Partnership Act (CBTPA) in October 2000, and enjoys access to U.S. Generalized System of Preferences (GSP) benefits. Due to concerns over serious worker rights protection issues, however, Guatemala's benefits under both the CBTPA and GSP are currently under review.