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Guatemala’s government expects the economy to grow 4 percent in 2013

Antigua, Guatemala

Antigua, Guatemala

Guatemala’s government expects the economy to grow 4 percent in 2013.
Guatemala’s primary natural resource is the rich soil of its highland valleys and coastal plains, but it also has some petroleum, as well as nickel, lead, zinc, iron, and small quantities of gold, silver, and jade. Only 13 percent of the land is farmed. Forests and woodlands cover 26 percent, offering valuable timber, fine woods, and other products for both domestic use and export. The remaining sections of the country include urban areas, rugged terrain, desert, and lowland areas that have become exhausted or are otherwise unsuitable for agriculture or grazing.

Guatemala is the most populous country in Central America with a GDP per capita roughly one-half that of the average for Latin America and the Caribbean. The agricultural sector accounts for 13% of GDP and 38% of the labor force; key agricultural exports include coffee, sugar, bananas, and vegetables. The 1996 peace accords, which ended 36 years of civil war, removed a major obstacle to foreign investment, and since then Guatemala has pursued important reforms and macroeconomic stabilization. The Dominican Republic-Central American Free Trade Agreement (CAFTA-DR) entered into force in July 2006 spurring increased investment and diversification of exports, with the largest increases in ethanol and non-traditional agricultural exports.

While CAFTA-DR has helped improve the investment climate, concerns over security, the lack of skilled workers and poor infrastructure continue to hamper foreign direct investment. The distribution of income remains highly unequal with the richest 20% of the population accountingfor more than 51% of Guatemala’s overall consumption. More than half of the population is below the national poverty line and 13% of the population lives in extreme poverty.

Poverty among indigenous groups, which make up 38% of the population, averages 73% and extreme poverty rises to 28%. Nearly one-half of Guatemala’s children under age five are chronically malnourished, one of the highest malnutrition rates in the world. Given Guatemala’s large expatriate community in the United States, it is the top remittance recipient in Central America, with inflows serving as a primary source of foreign income equivalent to nearly two-fifths of exports or one-tenth of GDP. Economic growth fell in 2009 as export demand from US and other Central American markets dropped and foreign investment slowed amid the global recession. The economy gradually recovered in 2010-12.