José Manuel Salazar-Xirinachs, executive secretary of the Economic Commission for Latin America (ECLAC) based in Santiago, Chile, was in Guatemala last Monday with the objective of meeting with President Bernardo Arévalo and other authorities and presenting them with a diagnosis of the country. , as well as the main challenges that, in the opinion of the institution, must be addressed.
What is the objective of your visit?
The idea of visiting Guatemala is to talk with President Bernardo Arévalo and members of the cabinet regarding the cooperation they may need from ECLAC, since we have an intense history in general.
This is a new government, with enormous challenges and demands, and to see what are the priorities and areas in which it can support, considering the great challenges that Guatemala has.
From ECLAC’s vision, what is the diagnosis of Guatemala for 2024?
On the one hand, there are things that Guatemala shares with the rest of the Latin American countries and one of them is that the global economy and geopolitics are not easy at all, and the interaction between the local and the international is key.
There is a “very challenging” international context; Geopolitics are introducing a lot of uncertainty into the world economy, which is slowing down and growing at only 2.9% this year, as well as trade; a competition and a rivalry that also affects. But opportunities are also created, in issues such as the reconfiguration of value chains.
There are international situations that help and others that do not. Now we are in an unhelpful situation and there are no favorable tailwinds, but rather a series of threats and risks that must always be taken into account. To judge economic performance, one must also see if international circumstances are helping today, in almost the majority of Latin American countries the situation is difficult.
In that context, how does Guatemala look?
There are several dimensions to analyze this: there is macroeconomics, social issues, poverty, inequality, productive development, growth and infrastructure, among other things.
On the macroeconomic issue, Guatemala does not actually present a situation of major imbalances, compared to other economies in Latin America or the world: the fiscal deficit is not that high (1.5% of the gross domestic product, GDP); nor the external debt (30%); inflation is not out of control at all… So, one can say that there is not a situation of extreme imbalance in any dimension.
But several challenges remain…
At a macroeconomic level, the great challenge for Guatemala is for the government to make social investments and, on the other hand, encourage investments in infrastructure, health and education. All of this costs money, requires financing and the options are the mobilization of internal resources, external debt, issuance of bonds or aid. And the international one is very little.
I would say that the macroeconomic challenge is how Guatemala will mobilize resources with some combination of those that I mentioned, to be able to move the needles that are needed in education and productive development, because the rate of public investment here is low and that hinders development.
Our experience at ECLAC tells us that there is a synergy between public and private investment and that is an issue that Guatemala must resolve.
In social investment?
Of course, reduce gender inequalities down to territoriality and create employment, because that is the best social policy, but this requires attracting investments.
How do you see the current situation of the country in productive development, sustainability and inclusion?
First I start as we are proposing it for Latin America because although there are differences, it applies to all countries. We see the region in three traps, keeping the differences between countries, some more than others, but there are no exceptions.
First a short-term low growth trap, which slowed in 2020 and 2021, and on average the growth for the entire region is 0.9%, which is low. But the problem of the inability we talk regarding regarding growth is long-term and structural.
In a decade the average growth from 2014 to 2023 was 0.8%, so it is a lost decade, more than that of 1980, because in that year it grew 2% above. So how can we avoid a third lost decade for Latin America? And Guatemala is not among the worst cases, because in the last decade it has grown around 3%, above the average, although it would be desirable for this growth to be a little higher.
The second trap is high inequalitybecause as a region we continue to be the most unequal in the world and that is a serious problem due to an issue of social justice, apart from the fact that it is economically inefficient and it has been proven that less unequal countries tend to grow more.
The third trap we see is low institutional capacity and a deterioration in almost everything, but it depends on the country that there is a mix of governance with technical, operational, political capabilities, the ability to lead, have social relations with different relevant groups and prospective, which is the ability to think in the medium and long term , since short-termism dominates.
Not having spaces for social dialogue is in itself a structural trap and a problem for being able to move forward.
Why is education key to reducing inequality?
A good public and private educational system has proven in many stages of history to be a great ladder of upward social mobility, in which children from the poorest lower-middle class families with a good education, far surpass the employment of their parents or grandparents, and therefore, their income.
That is something that unfortunately has deteriorated in several Latin American countries, and with the educational blackout of the pandemic, great steps were taken backwards.
Will there be any short-term approach to possible solutions?
There are no magic wands and they are complex issues, but countries can take responsibility for their development. That requires a little patience, regaining trust in a government, public policies and institutions; There is also a desire for change and improvement, but that does not happen overnight.
One of the issues is how to boost economic growth, and we have a series of sectors that can be its drivers. It is not that growth is a panacea, but it is what produces better quality employment, creates opportunities and tax revenues to finance social policies.
There are totally new productive sectors adjusted to the 21st century and Guatemala has enormous potential in tourism, but you have to work, have laws, production chains and security, because this industry has multiplier effects.
In this era, how should poverty, economic inequality, inequity and low job creation be understood and solved, which ultimately affect emigration?
These are the causes of migration and it is not exclusive to Guatemala that if a population does not find sufficient opportunities and is going through difficult economic situations, it is logical and human to go look for opportunities in other places.
Above all, when there are stories of relatives who have arrived and send resources, but we know that it is a very complicated route due to all kinds of legal and illegal obstacles. That is why we must work on an agenda of employment, education, health, food and social policies.
I see in Guatemala a government that won the elections, raising hope, but that will require patience and joint work with all sectors, because it is not regarding the State alone being able to solve the problems. Without these ingredients, not even the most enlightened of governments can move forward.
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