Bleak Outlook for the next president of Guatemala

Experts agree Alvaro Colom’s successor will face a difficult fiscal, economic and political situation.

Monday, October 31, 2011

First, it will be difficult to achieve the tax reform needed to tackle the decline in tax revenues which is set to continue into 2012. Ricardo Barrientos, Central Institute for Fiscal Studies (ICEFI in Spanish), also said that the losing candidate in the election will become the main opposition, and will complicate any reform attempts or approval of additional financing for the state.

Moreover, the struggle between the factions created by the election campaign could mean the budget for 2012 will not be approved, "which would mean that they will keep the current budget allocations, whether or not they have the resources" which could lead to a reduction in public spending from $804 down to $344 million.

For its part, the private sector has not shown itself to be in favor of tax increases. Andres Castillo, president of the Guatemalan Chamber of Industry, argued that the country has borrowed excessively for 4 years, and that people will no longer accept the tax burden until there are reliable mechanisms to ensure transparency.

The whole picture may be complicated significantly if the global economic situation worsens. Hugo Noe Pino, executive director of ICEFI, explained that there is the possibility of a new global recession, for which it should implement an anti-crisis plan that anticipates a decline in import revenues.

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