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New deal for Guatemala?

Monday, January 25, 2016


Guatemala’s public administration got a fresh start last week with the inauguration of television personality Jimmy Morales, following the resignation and arrest last September of former President Oscar Perez, on corruption charges.

Investors may be encouraged, if Morales can fulfill election promises to increase government efficiency by cutting down on corruption and cronyism.

With a few exceptions, Guatemala already has some of the best economic indicators in Central America.

Big financing spreads in quetzales are an issue, as borrowers last year paíd an average rate of interest of 13% on loans from financial institutions, while investors on average earned only 5,5% on six-month securities.

On the other hand, real growth in the value of national production averaged 4% between 2013 and 2015, second only to Panama in the region, while income per person increased from $3,500 to $3,900.

With government deficits at or below 2% during the period, public-sector debt held steady at just under 25% of GDP, the lowest in Central America and significantly below that of most of the world’s economies.

In addition, Guatemala was able to reduce its current-account deficit from 2,5% of GDP to 1.7%, even though the value of the quetzal rose slightly during the period, from 7.7 to the dollar to 7.5.