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Economic Growth

Situation Analysis

The economies of Central America still rely heavily on agriculture as a source of rural employment and income generation. In the Guatemalan highlands, subsistence agriculture is the primary source of livelihood. About 33 percent of the economically active population works in agriculture, 74 percent of whom are poor. Over half of Guatemala’s total population is below the poverty line, and Guatemala has the third-worst income distribution in the world.

More than half of all children under five years old suffer from chronic malnutrition. The per capita income of $2,602 masks extreme inequalities between urban, largely Ladino, versus rural, mostly indigenous, people.

Agricultural and forestry production has tremendous potential for spurring rural income growth and development, and can contribute to alleviating poverty. However, people must have legal rights to land use, and production must meet domestic demand by growing significantly faster than the country's population; one of the fastest growing populations in the Americas.

Production and export of non-traditional agricultural and forestry products is an engine to drive income growth. Guatemalan producers must improve to meet the higher standards for quality, volume, and delivery required to penetrate new national and international markets. Progress is measured by including more non-traditional and higher-value products, and by improved competitiveness in world markets. 

A more dynamic economy can generate the jobs needed, especially in rural areas characterized by low productivity in the agriculture sector and a lack of infrastructure needed to increase market access. The Guatemalan economy did very well between 2004 and 2007, and demonstrated the fastest growth in a decade (5.7 percent in 2007) with per capita GDP up by 2.3 percent and foreign direct investment up by 22 percent. Consistent growth at these levels is needed over many years to significantly reduce Guatemala’s high poverty rates. Adverse consequences of the global financial and economic crises began to affect Guatemala in 2008, manifested in a slowdown in GDP growth. Nevertheless, the economy grew by 4.0 percent in 2008 and by 0.4 percent in 2009.

USAID Response

USAID works in agriculture to reduce inequalities by mitigating land conflict and by strengthening competitiveness through micro-credit programs, trade promotion, business development initiatives, and policy reform. 

The long-term goal is a more competitive Guatemala through inclusive growth, job creation, and poverty reduction; full participation in the Dominican Republic-Central America-United States Free Trade Agreement zone, and significantly enhanced food security. USAID continues assistance to the Government of Guatemala rural development strategy by working with the Ministry of Agriculture, Pro-Rural (the president’s office to assist traditional agriculture in poorest rural areas), and other government agencies. The Agency strategy promotes more vigorous and inclusive growth by diversifying and expanding the rural economy into horticulture, coffee, forestry and ecotourism. Technical assistance is provided in trade and investment to improve the business climate and market regulation. 

USAID focuses its programs on the rural economy because Guatemala’s competitive advantage lies in its cultural and natural resource base and because poverty is highest in rural areas. Assistance is integrated in the following specific areas: policy and regulation, direct technical assistance to rural small and medium enterprises via the value-chain approach, access to financial services, and sustainable natural resource management.

Agency programs include:

Trade and Investment: USAID assists the process of formulating the laws, regulations and policies related to rural development, competitiveness and trade, and strengthening public institutions.

Examples of specific work areas include:

  • A national policy for agricultural research and extension
  • Studies of small-scale irrigation systems
  • Incorporation of the economic growth model for the highlands into the national policy for job generation
  • Competitiveness of small and medium enterprises
  • Evaluation of the impact of the Dominican Republic-Central America-United States Free Trade Agreement
  • Trade facilitation training for customs officials
  • Streamlining the shipment of goods
  • A national tourism strategy
  • Market regulations for the telecommunications sector

Agriculture: USAID assists small-scale producers who live on one acre or less in the production and commercialization of high-value horticulture and quality coffee products. The value-chain approach is used to link producers with markets. Activities include: support to establish and/or strengthen producer organizations; training in food safety standards, best agriculture, and basic management practices; productivity and quality improvement; facilitation of credit and loans; development of long-term alliances with buyers such as Wal-Mart, Central America and Cuatro Pinos; and environmental certification for timber and non-timber products. USAID incorporates environmental protection and conservation in its agricultural activities.

Private Sector Competitiveness: Building on the supply-chain approach, USAID supports private-public alliances in a wide variety of products and services such as mini-vegetables, high-value agricultural products, gourmet coffee, forest floral greenery, quality non-traditional species of hardwood, handmade ceramics, hand-woven textiles, and community ecotourism. USAID programs engender market certification processes so products and services can tap into higher value markets that demand organic, ecologically sustainable production or eco-friendly tourism. USAID works to strengthen small producer cooperatives (often coordinating USAID food security programs), trains producers in agricultural best practices and managerial and business skills, and pursues environmental certification and the Green Deal certification seal for tourism services.

Environment: An important element of rural economic growth is the productive use of Guatemala’s environmental assets. USAID helps to ensure solid environmental management while strengthening political will through policy support for environmental enforcement by governmental and non-governmental entities. USAID pursues sustainable natural resource management in the forestry, quality coffee, and community-tourism sectors. Assistance is provided to the Environmental Services Maya Biosphere Reserve Project to sell carbon credits in voluntary carbon markets to prevent further deforestation.

Major Results and Accomplishments (as of September 2009)

  • $114.5 million in sales of horticulture, high quality coffee, forestry, tourism, and handicraft-supported products and services
  • Improved natural resource management of 670,643 hectares 
  • Over 54,000 one-year, full-time jobs created
  • Improved well-being for more than 20,000 rural households
  • Access to a total credit of $20 million for small and medium scale entrepreneurs in agriculture, forestry, and tourism sectors via a USAID loan agreement with Banrural  

 

Program Names

Implementing Partners

Tax Management

U.S. Department of the Treasury

Tierras II Land Conflict Resolution

Mercy Corps

Strengthen Business and Product Competitiveness

AGEXPORT--Guatemalan Exporters Association

Guatemala Community Tourism Alliance

Counterpart International

Forestry Enterprises

Rainforest Alliance

More Competitive Enterprises in Agro-Industry

ANACAFE--National Coffee Growers’ Association

Quality Assurance and Small Business Development

Fundación Agil

Inclusive Market Alliance for Rural Entrepreneurs

Mercy Corps/Wal-Mart

Forest Fires

Wildlife Conservation Society

Protecting Investments

U.S. Department of the Interior

Development Credit Authority: Loan Portfolio guarantee

Banrural

Community Habitat Reconstruction and Risk Reduction Management

United Nations Development Program (UNDP)

 

Last updated: July 03, 2014

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