The Government risks failing to comply with the current Stand-By Agreement with the International Monetary Fund, as its fiscal deficit would reach 3.9%.
However, Fernando Delgado, IMF representative for Guatemala, stated that “if the Government provides strong reasons for increasing the deficit, the Fund could maintain the Stand-By Agreement”.
Meanwhile, the Guatemalan Congress is awaiting the opinions of the Monetary Board and the Public Finances Ministry to decide if they approve the issue of $563 million to $876 million.
Fitch Ratings warned that although Central American sovereigns have resisted the global crisis pretty well so far, they now require fiscal consolidation in order to maintain their credit ratings.
Summary
Fitch‐rated Central American sovereigns have thus far withstood the destabilizing effects of the global economic and financial crisis, despite monetary and exchange rate policy challenges.
The Honduran Treasury has outstanding debt for $300 million, but has only $8 million available.
In light of this situation, Finance Minister Gabriela Núñes warned that the upcoming administration, headed by Porfirio Lobo, must enforce "deep fiscal austerity" and restore relations with the international community, in order to resume external aid.
According to the article in Proceso.hn, this crisis has two main causes: a $158 million drop in tax collection, plus a $211 million increase in salaries.
Fitch expects that Latin America’s real GDP will contract by 0.9% in 2009, with Brazil’s economy stagnating at best and Mexico contracting by over 2%.
Latin American economies have recoupled with the crisis in the developed economies. Since September 2008, Latin American countries have been buffeted by stronger external headwinds, as evident from the fall in regional currencies and stock markets and from widening bond spreads.