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- GDP (PPP):
- $74.7 billion
- 3.8% growth
- 3.3% 5-year compound annual growth
- $5,070 per capita
- Inflation (CPI):
- FDI Inflow:
Guatemala’s economic freedom score is 60.0, making its economy the 85th freest in the 2013 Index. Its score has decreased by 0.9 point, mainly because of declines in freedom from corruption and labor freedom. Guatemala is ranked 16th out of 29 countries in the South and Central America/Caribbean region, and its overall score is just above the world average.
Reflecting the lack of consistent commitment to structural reform, Guatemala has registered marginal and uneven progress in advancing economic freedom. The economy enjoys a relatively high degree of openness to global trade, as tariff rates are quite low, but the dynamic gains from trade are largely undercut by the lack of progress in improving the investment regime and regulatory efficiency. However, implementation of several recent free trade agreements is having a positive impact, and foreign direct investment has recovered from recessionary levels.
Guatemala has lagged notably in promoting the effective rule of law. The judicial system remains vulnerable to political interference, and property rights are not strongly protected. Lingering corruption further undermines overall economic freedom and hampers the emergence of more vibrant economic activity in the private sector.
Former General Otto Perez Molina won the presidency in 2011, replacing social democrat Alvaro Colom, whose four-year term was marked by internal political feuding and mounting insecurity. Tax increases passed in March 2012 were part of a modest tax reform designed to raise government revenues. Guatemala is the administrative hub for the Central American Integration System, which aims to improve economic cooperation in the region, and works closely with the U.S. on security issues. The most advanced sector, telecommunications, is fully deregulated. The Central America–Dominican Republic–United States Free Trade Agreement has encouraged trade flows and opportunities to develop niche markets in the U.S.
Judicial resolution of disputes is time-consuming and often unreliable. Inadequate documentation can lead to conflicting claims of land ownership, undercutting protection of property rights. Pervasive corruption, a lack of transparency, and a weak civil service hinder the effective implementation of policy. Government action is also hampered by legal and illegal special-interest groups entrenched in the state.
The top income and corporate tax rates are 31 percent. Other taxes include a value-added tax (VAT) and a tax on real estate. The overall tax burden amounts to 10.8 percent of total domestic income. Government spending corresponds to 14.7 percent of total domestic output. The budget balance remains in deficit, although public debt continues to be less than 25 percent of GDP.
The regulatory environment lacks efficiency. Starting a business takes 40 days and over 10 procedures, and the cost of obtaining necessary licenses remains about five times the level of average annual income. The labor market is inefficient, and a large part of the labor force is employed in the informal sector. Inflation has abated slightly. The state maintains few price controls but subsidizes numerous economic activities and products.
The trade-weighted average tariff rate is quite low at 2.4 percent, but non-tariff barriers add slightly to the cost of trade. Foreign investors technically receive national treatment, but regulatory hurdles can impede investment. The highly concentrated banking sector remains relatively stable and well capitalized, and the number of non-performing loans is declining. The recently enacted insurance law opened the insurance market to foreign firms.