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Event
Guatemala's murder rate is expected to fall to around 34 homicides per 100,000 inhabitants in 2012, down from 39 in 2011, according to recently released data, marking the third consecutive year of improvement.
Analysis
Although October and November were two of the most violent months so far in 2012, a marked reduction in homicides in the first five months of 2012 is expected to result in an overall improvement in the country's murder rate for the full year, according to recently released data from the Instituto Nacional de Ciencias Forenses (INACIF, the National Forensic Sciences Institute) and the Policia Nacional Civil (PNC, the national police). Using 2011's rate of 39 as its baseline, the administration of the president, Otto Perez Molina, has vowed a 50% reduction in the murder rate by the end of its current constitutional four-year term in 2014. If confirmed, the latest homicide statistics will move Mr Perez Molina closer to this goal and mark a third consecutive year of improvement after a peak in murders in 2009.
Despite the improvement in the overall murder rate, the geographic concentration of violence remains the same as in previous years. The eastern, northern and southeastern regions of the country have consistently registered the worst homicide rates while rates are lower in the west, which is predominantly inhabited by the indigenous population and is generally more peaceful. In some areas of the west, annual homicide rates are in the single digits, bucking the national trend.
The falling homicide rate will provide a political boost to the Perez Molina administration, which has made fighting crime a focal point of its policy agenda since taking office in January (even though the reduction in crime began under the previous administration). However, it remains unclear how the public's perception of safety will be impacted by the new statistics. It is generally agreed that a sustained reduction in crime will be necessary before there can be a noticeable impact on private consumption, savings and investment. Estimates of the economic cost of violence and crime in Guatemala are as high as 10% of GDP.
December 07, 2012
Alvaro Colom Caballeros
Founder and leader of the centre-left Unidad Nacional de la Esperanza (UNE), Mr Colom won the presidency in the 2007 election after beating Otto Perez Molina (PP) in the second-round presidential run-off vote. An engineer by training and a textile industrialist, he benefited from considerable public recognition (a formidable asset in Guatemalan politics), having come second in the 2003 presidential election representing the UNE, and third in the 1999 presidential election, when he represented the alliance of the Desarrollo Integral Autentico (DIA) and the Unidad Revolucionaria Nacional Guatemalteca (URNG). Having served briefly as vice-minister of economy (1991-92) in the Serrano administration, between 1992 and 1997 Mr Colom presided over the Fondo Nacional para la Paz (Fonapaz, the national foundation for peace), a government organisation aimed at implementing social projects in areas affected by the civil war and at reintegrating former guerrilla combatants into society. He has also been one of the country's main promoters of the maquila (offshore assembly for re-export) industry.
Otto Perez Molina
A retired general and the founder (in 2001) and leader of the right-wing Partido Patriota (PP), Mr Perez Molina emerged in 2007 as the closest rival of Mr Colom. He centred his campaign on a tough stance on tackling crime, under a slogan of urge mano dura (a strong hand now). His campaign benefited from the FRG's lack of a high-profile candidate. His detractors have raised concerns over possible links with paramilitary groups during his time at the military intelligence agency, which he headed in the early 1990s.
Efrain Rios Montt
Leader and founder of the FRG, a former president of Congress, and former general and military dictator (1982-83). Following the decision in July 2003 of the Constitutional Court to overturn a constitutional bar on former coup leaders seeking the presidency, he was allowed to run in the 2003 presidential election, in which he came a distant third. His paternalistic and moralistic political style still appeals to many voters in rural areas but, given his role in the civil war, he is a divisive figure. Human rights organisations continue to campaign for his indictment and conviction on charges of gross violation of human rights committed during his period as de facto head of the government. However, the decision by the FRG to register the now retired Mr Rios Montt to run for a seat in Congress in the 2007 legislative election, which he won, will see him continue to enjoy immunity from prosecution.
December 19, 2008
Official name
Republic of Guatemala
Form of state
Unitary republic
Legal system
Supreme Court, at the apex of a subordinate court system, elected by the National Assembly for four years
National legislature
Unicameral Congress, with 158 members, elected every four years; re-election possible for members and leader of Congress
Electoral system
Universal adult suffrage
National elections
A former army general, Otto Pérez Molina, won the second-round presidential election run-off held on November 6th 2011 with 53.8% of the vote. The next presidential, legislative and municipal elections are set to take place in September 2015
Head of state
President, elected by universal suffrage for a single term of four years; cabinet, headed and appointed by the president
National government
Partido Patriota (PP)
Main political organisations
Main opposition parties: Unidad Nacional de la Esperanza (UNE); Gran Alianza Nacional (GANA); Unión del Cambio Nacional (UCN); Libertad Democrática Renovada (LIDER); Compromiso, Renovación y Orden (CREO); Encuentro por Guatemala (EG); Visión con Valores (VIVA); Partido de Avanzada Nacional (PAN); Frente Republicano Guatemalteco (FRG); Frente Amplio; Partido Unionista (PU)
Key ministers
President: Otto Pérez Molina
Vice-president: Roxana Baldetti
Agriculture, livestock & food: Efraín Medina
Communications, transport & public works: Alejandro Sinibaldi
Culture & sport: Carlos Batzín
Defence: Ulises Noé Anzueto
Economy & trade: Sergio de la Torre
Education: Cinthia del Aguila
Energy & mines: Erick Archila
Environment & natural resources: Roxana Sobenes
Finance: Pavel Centeno
Foreign relations: Harold Caballeros
Interior: Mauricio López Bonilla
Labour & social security: Carlos Contreras
Public health & social assistance: Jorge Villavicencio
Social development: Luz Lainfiesta
President of Congress
Gudy Rivera
Central bank president
Edgar Barquín Durán
December 17, 2012
Outlook for 2013-17
Review
December 17, 2012
| Real gross domestic product by sector | |||||
| (% share of GDP) | |||||
| 2003 | 2004 | 2005 | 2006 | 2007 | |
| Agriculture | 14.1 | 14.3 | 14.1 | 13.5 | 13.3 |
| Industry | 26.7 | 25.9 | 26.2 | 26.1 | 25.8 |
| Services | 59.2 | 59.8 | 59.7 | 60.4 | 60.9 |
| Source: Economist Intelligence Unit. | |||||
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December 19, 2008
Data and charts: Annual trends charts
December 17, 2012
Guatemala: Country outlook
FROM THE ECONOMIST INTELLIGENCE UNIT
POLITICAL STABILITY: During the remainder of his four-year term, the president, Otto Pérez Molina of the populist conservative Partido Patriota (PP), will seek to deliver improvements in security, higher spending on social programmes and sweeping changes to the 1985 constitution. The PP is in a stronger position than previous administrations to make progress with its legislative programme, owing to a broad alliance in Congress and the weakened state of the opposition. However, progress will remain vulnerable to extended periods of paralysis--a common feature of the political scene--as the small libertarian party, Libertad Democrática Renovada (LIDER), continues to employ delaying tactics to block the PP's agenda. The fragile nature of party allegiances and ideological loyalties in Guatemala's fragmented political scene means that legislative paralysis will become a more significant challenge as the forecast period progresses and the PP's broad alliance comes undone. The Economist Intelligence Unit expects this to complicate policymaking and reduce political effectiveness, and so the PP's window of opportunity to pass legislation is likely to close early in the forecast period.
ELECTION WATCH: The next presidential, legislative and municipal elections are set to take place in September 2015. Although there have been initial indications that Mr Pérez Molina might attempt to remove the constitutional bar preventing him from running for a second term, our forecast is based on the assumption that he will be unable to do so. He will therefore need to groom a successor, but the odds are stacked against the PP. No ruling party has secured re-election in recent history, with Guatemala's political pendulum swinging between conservative governments (such as that of the PP) backed by the traditional elites and the urban middle classes, and governments backed by emerging elites and rural voters (for example, that of LIDER's Manuel Baldizón). Every candidate defeated in the last 15 years in a second-round run-off, as Mr Baldizón was, has won the presidency at the next election. Sandra Torres, the former first lady (2008-11) and leader of the centre-left Unidad Nacional de la Esperanza (UNE), will be constitutionally able to run in 2015, after she was barred from standing in 2011 for having been married to the incumbent president (despite having divorced). She has begun to rebuild her party, which had all but collapsed owing to defections and criminal investigations involving its leaders.
INTERNATIONAL RELATIONS: Mr Pérez Molina, a retired army general, will need to continue to show respect for democracy and human rights, to compensate for the negative international image of the Guatemalan army, which is tainted by its responsibility for the majority of atrocities committed during the country's bloody civil war (1960-96). This reputation could become a handicap with European donor nations, as well as the US, with which Mr Pérez Molina seeks closer military co-operation to combat rising crime and drug-trafficking. His push eventually to decriminalise drugs may irk US officials, but the bilateral relationship will remain strong, as both countries have an interest in continued co-operation. This is also true for Central American countries--the majority of which oppose drug decriminalisation--with which trade ties and security co-operation are crucial.
POLICY TRENDS: The authorities will implement cautious policies that will help to preserve macroeconomic stability, but Guatemala will continue to be exposed to swings in the global economy, which remains fragile owing to ongoing debt problems in a recessionary Europe and the continued lacklustre growth of the US economy. Weakness in the US economy and continuing instability in Europe will make the Banco de Guatemala (Banguat, the central bank) retain an accommodative stance, leaving its policy rate unchanged at 5% until late 2013.
ECONOMIC GROWTH: At 3.2%, real GDP growth is estimated to have decelerated, but remained firm, in 2012 on the back of a slow US recovery. On the assumption that global conditions improve in 2013, GDP growth will rise slightly, to 3.5%, before averaging 3.3% per year in 2014-17, constrained by low productivity and insufficient (albeit growing) investment. The outlook in the US will continue to dominate Guatemalan growth trends in 2013-17, as it is the country's main export market and source of remittances, which in turn buttress private consumption. Growth in private consumption--which accounts for 85% of GDP--will continue to underpin economic expansion during the outlook period, at an average of 3.9% per year in 2013-17. Government consumption, driven by spending on security and social programmes, will be given a modest boost by recent revenue-raising measures and will post real growth averaging 7.8% in 2013-17 (up from 3.9% in 2012). Gross fixed investment growth will gather pace during the outlook period, driven by public-private partnerships for long-overdue infrastructure upgrades. Growth in real exports will accelerate in 2013 as a result of implementation of the EU-CAAA, as well as the existing FTA with the US. However, import growth--driven by increasing demand for fuels, as well as consumer and industrial goods--will continue to outpace that of exports throughout the outlook period, resulting in a negative contribution of net trade to GDP growth.
INFLATION: Annual inflation has accelerated in recent months, to stand at 3.3% in October (from a two-year low of 2.7% in August), but remains below the lower end of Banguat's 3.5-5.5% target band. Guatemalan consumer prices are strongly influenced by international oil prices, and we expect that these will remain contained during the rest of the year. However, there is also a possibility that inflation might fall further if the quetzal's appreciation trend becomes more marked. During the remainder of the outlook period, there are risks that inflationary pressures could intensify owing to supply bottlenecks, volatile domestic food prices (resulting from inclement weather conditions) and movements in international oil prices. We forecast annual average inflation of 4.5% in 2014-17, within Banguat's target. Pervasive underemployment will keep wage pressures subdued, despite pressure from public-sector unions--which are not part of Mr Pérez Molina's base of support--for wage rises.
EXCHANGE RATES: We expect the quetzal to sustain a gentle appreciating trend in 2013--to reach Q7.78:US$1 by year-end--supported by remittance inflows and export earnings. Appreciation will be limited by periodic volatility in global currency markets. Our forecast anticipates that in nominal terms, the quetzal will remain steady at around Q7.8:US$1 in 2013-14, and depreciate gently thereafter, as developed economies recover more firmly and a growing current-account deficit puts pressure on the currency. With Guatemala's inflation rate running ahead of those of its trading partners, this represents a modest appreciation in real, trade-weighted terms. Banguat will continue to make discretionary interventions to smooth sharp exchange-rate fluctuations, aided by a comfortable and stable reserves cushion (which stood at US$6.8bn in early December, equivalent to around four months of imports).
EXTERNAL SECTOR: Developments in the trade account will continue to drive the current-account deficit. We estimate that the current-account deficit widened to 5% of GDP in 2012 (from 3.3% in 2011), as a result of lower export earnings, owing to slower global growth and weak export prices. The current-account deficit will narrow to 4.3% of GDP in 2013 and 2014, before widening to an average of 5% of GDP in 2015-17. The deficit will be driven by a structurally high trade deficit (averaging 10.7% of GDP in 2013-17), a small services deficit (averaging 0.8% of GDP in 2013-17) and a steady income deficit (averaging 3% of GDP), of which an increasing share will arise from foreign companies' profit remittances. The transfers surplus will remain sizeable, but will continue to narrow as a percentage of GDP, as--despite showing signs of a resurgence in 2012--growth in remittances remains below the consistent double-digit rates registered in the boom years of 2002-07. Our forecast assumes that international reserves will increase each year from 2013 to 2017, but the rate of growth will be slower than that of import growth, reducing import cover from 4.2 months in 2012 to 3.5 months by 2017.
December 03, 2012
Outlook for 2013-17: Forecast summary
| Forecast summary | ||||||
| (% unless otherwise indicated) | ||||||
| 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | |
| Real GDP growth | 3.2 | 3.5 | 3.3 | 3.2 | 3.3 | 3.2 |
| Gross agricultural production growth | 3.2 | 3.2 | 2.8 | 3.1 | 3.3 | 3.0 |
| Consumer price inflation (av) | 3.8 | 4.4 | 4.7 | 4.3 | 4.5 | 4.5 |
| Consumer price inflation (end-period) | 3.7 | 4.5 | 4.8 | 4.3 | 4.5 | 4.5 |
| Money market interest rate (av; %) | 5.5 | 5.2 | 5.7 | 6.3 | 6.3 | 6.3 |
| Central government balance (% of GDP) | -2.6 | -2.5 | -2.0 | -2.3 | -2.4 | -2.5 |
| Exports of goods fob (US$ bn) | 9.6 | 10.4 | 11.5 | 12.6 | 13.7 | 14.9 |
| Imports of goods fob (US$ bn) | 15.6 | 16.7 | 18.3 | 20.4 | 22.1 | 24.0 |
| Current-account balance (US$ bn) | -2.6 | -2.5 | -2.8 | -3.4 | -3.8 | -4.2 |
| Current-account balance (% of GDP) | -5.0 | -4.3 | -4.3 | -4.8 | -4.9 | -5.0 |
| External debt (year-end; US$ bn) | 16.2 | 16.7 | 17.3 | 17.7 | 18.1 | 18.4 |
| Exchange rate Q:US$ (av) | 7.83 | 7.76 | 7.76 | 7.84 | 7.96 | 8.11 |
| Exchange rate Q:US$ (end-period) | 7.80 | 7.78 | 7.79 | 7.89 | 8.03 | 8.18 |
| Exchange rate Q:€ (av) | 10.05 | 9.79 | 9.72 | 9.71 | 10.03 | 10.21 |
| Exchange rate Q:€ (end-period) | 10.06 | 9.77 | 9.62 | 9.90 | 10.11 | 10.28 |
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December 17, 2012
Land area
108,889 sq km; two-thirds mountainous (volcanic), heavily forested in the north, fertile coastal plains
Population
14.7m (2011; Instituto Nacional de Estadística)
Main towns
Population in '000 (2011)
Guatemala City (capital) & metropolitan area 3,156
Climate
Subtropical; temperate in highlands
Weather in Guatemala City (altitude 1,480 metres)
Hottest month: May, 16-32°C (average daily minimum and maximum); coldest month: January, 10-28°C; driest month: January, 0.7 mm average rainfall in the last five years; wettest month: September, 263 mm average rainfall in the last five years
Language
Spanish; at least 21 Mayan indigenous languages, plus two non-Mayan indigenous languages
Measures
Metric system; also old Spanish units
Currency
1 quetzal (Q)=100 centavos; average exchange rate in 2011: Q7.79:US$1.
Time
6 hours behind GMT
Public holidays
January 1st; Good Thursday; Good Friday; Good Saturday; May 1st; May 10th (Mothers' Day); June 30th; August 15th (Guatemala City); September 15th; October 20th; November 1st; December 24th (half day); December 25th; December 31st (half day)
March 15, 2012