Government: Lights, Shadows and Challenges

The agile execution of economic stimulus programs, the considerable increase in public debt and the need to accelerate the process of economic reactivation are the lights, shadows and challenges identified a year after Alejandro Giammattei took office as president of Guatemala.

Thursday, January 14, 2021

On January 14, 2020, when Giammattei took office as president of Guatemala, he received a country with weak institutions, legal uncertainty and a business sector that was asking for a less "hostile" environment for new investments.

Upon the arrival of the new administration, it was expected that importance would be given to an agenda that focused on economic growth, attracting investment, and modifying laws to make the labor and financial markets more flexible.

In March 2020, when the first cases of the coronavirus were reported, the government was forced to close the borders, restrict the mobility of people and ban various productive activities. These actions caused a sharp drop in the Monthly Index of Economic Activity (IMAE), with May being the month in which the worst reduction was reported, amounting to 12%.

In order to face the health and economic crisis, Giammattei asked for loans in the millions to finance the construction of hospitals, social programs, plans to help businesses and payments to unemployed workers.

In general, the first year of the government has been marked by the pandemic, the economic crisis, the fall in public income, the high levels of debt and the growing need to reactivate the economy.

Check out the "System for monitoring markets and economic situation in the countries of Central America", developed by CentralAmericaData.

Paul Boteo, executive director of Fundación Libertad y Desarrollo, explained to Prensalibre.com that "... although it was possible to act with agility in the programs of economic and social stimulus and to face the pandemic, it failed in the execution. Unfortunately, there is a perception of slow execution, that people were not reached with the necessary speed."

Regarding public finances, Boteo stated that "... compared to other countries, the government's debt levels are relatively low, but by Guatemalan standards, especially in the debt/tax revenue ratio, it is at a critical point, as it exceeded 300% and the ceiling is 240%. The objective of this variable is to measure the country's payment capacity. It is a very critical point that must be solved in the budget readjustment that will be proposed this year, and the deficit does not have to be so high for 2021 because that critical point was exceeded."

The country's economic environment has improved notably, since according to the last report of the Bank of Guatemala, the economic activity in the country began to report positive year-on-year variations as of September 2020, month in which a 0.4% increase was registered. In October and November, the IMAE continued its upward trend, growing 1.7% and 2%, respectively.

Although in general economic activity has recovered, sectors such as tourism and construction need support to be able to reactivate, since negative variations were still reported in November 2020.



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In the context of the economic crisis generated by the covid-19 outbreak, the CABEI approved a line of credit that the Panamanian government will use to finance the general state budget and programs for health protection, education and food security.

The Central American Bank for Economic Integration (CABEI) approved $250 million as part of the Development Policy Operations Program (DPO) to the Republic of Panama to financially support the country's economic recovery, the financial agency reported.

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Costa Rica: $300 Million More Debt to Face the Crisis

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The Central American Bank for Economic Integration approved a line of credit for the country to reinforce its fiscal sustainability and strengthen its macroeconomic stability, in the context of the economic crisis that arose from the outbreak of covid-19.

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Costa Rica: $500 Million to Address Covid-19 Crisis

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The Costa Rican Assembly approved in second debate a credit with the Latin American Development Bank, which will be used to assist people who lose their jobs, as well as employers and independent workers.

The funds from the $500 million loan from the Andean Development Cooperation, which was originally planned to be used for debt repayment, will be used to finance the Costa Rican government's response to the national emergency caused by the Covid-19 virus, the Legislative Assembly reported.

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