Mining in Guatemala
Team Leader: Kavisha Patel
Research Analysts and Writers:
Adam Francescutto, Gigi Joseph, Yaman Aswad, Kyla Yang, Jessica Ly
Political Overview
The South American Country of Guatemala is a constitutional democratic republic that is divided into 22 departments and 333 municipalities which are governed by a three-branch system, the judicial, executive, and legislative branches.[1] The National Congress and one house legislature, composed of 116 members, create the legislative branch, while the Supreme Court of Justice heads the judicial branch. Executive power is exercised by various levels of government, legislative power is exercised by various level of government and Congress of the Republic, and lastly, the judiciary is a separate entity independent of the executive and legislature branches.
The president of Guatemala is both the head of state and the head of government. The president has the authority to appoint both department governors and cabinet members.[2] Both the president and vice president are elected through a universal adult suffrage electoral system and are limited to one term. The current president of Guatemala is Jimmy Morales Cabrera, and the Vice president is Jafeth Carbrera, both have been in office since January 14, 2016.[3]
There are numerous political parties in Guatemala, and they are usually unstable and small. For this reason, parties rarely win the presidency more than once.[4] The current major political parties in Guatemala are the FRG (Guatemalan Republican Front) and the PAN (National Advancement Parties). The FRG party is generally characterized as being conservative and populist and the PAN party is described as conservative and business oriented.
Traditionally, Guatemala’s government does not exert a great deal of control over the economy and prefers to keep the involvement of political institutions minimal in this domain. The implications that follow is that there are very few regulations or interventions from the government causing the private sector to generate almost 85% of its gross domestic product.[5]
Economic Overview
Guatemala is one of the poorest countries in Latin America, with 60% of the population living in poverty and GDP per capita (PPP) at $8,100, compared to averages of $15,500 and $43,500 for Latin America & Caribbean, and the OECD respectively.[6] They are heavily reliant on remittances which make up 11.2% of GDP and almost entirely come from the United States.[7] In addition, major political tensions and aforementioned unstable parties have decreased investors’ confidence in the region.[8] However, sound monetary policy has kept inflation within the 3-5% target range and fiscal deficits have remained at decade lows.[9]
In the realm of economic risks, on the domestic side, the ongoing corruption scandals and delays in judicial decisions continue to be the biggest threat to economic activity. They have lowered business confidence in the region, especially for extractive industries and continue to be a strong source of uncertainty in the markets.[10] Globally, a slowdown in US growth due to trade tensions with China could decrease their demand of Guatemalan exports as well as decrease remittances.[11] In addition, potential US foreign policy changes regarding immigration could also negatively impact the remittances going to Guatemala.[12] However, on October 31, 2018, Standard & Poor’s kept Guatemala’s credit risk rating at BB- and maintained a stable outlook[13].
[1] "Guatemala - Politics, Government, and Taxation." Encyclopedia of the Nations. Accessed November 08, 2018.
[2] "Politics of Guatemala." Wikipedia. June 04, 2018. Accessed November 08, 2018. https://en.wikipedia.org/wiki/Politics_of_Guatemala.
[3] Ibid.
[4] Ibid.
[5] EIU Digital Solutions. "Guatemala." Political Structure. October 1, 2018. Accessed November 08, 2018.
[6] The World Bank, “GDP per capita, PPP (current international $),” DataBank, last modified 2017, https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?end=2017&locations=ZJ-GT-OE&start=1990&view=chart
[7] Melissa Vega, “Guatemala Remittances - 97 Percent from USA: IOM Study,” International Organization For Migration, last modified February 17, 2017, https://www.iom.int/news/guatemala-remittances-97-percent-usa-iom-study
[8] International Monetary Fund, “Guatemala: 2018 Article IV Consultation,” IMF Country Report No. 18/154 (2018): 1-2.
[9] Ibid, 5-6.
[10] Ibid, 35
[11] Ibid
[12] Ibid
[13] Central America Data, “Guatemala’s Risk Rating Confirmed,” CentralAmericaData Business Information, last modified Wednesday, October 31, 2018, https://www.centralamericadata.com/en/article/home/Guatemalas_Risk_Rating_Confirmed
