Poverty in Guatemala

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“Poverty is punishment for a crime the innocent did not commit.”
– Eli Khamarov

Poverty in Guatemala-Avivara
The following is an analysis of the general economic and social situation in Guatemala. Much of the information included here has been derived from the World Bank Country Study: Poverty in Guatemala, published in 2004. Other information contained in this report include statistics from the Guatemalan government, USAID, and recent findings (July, 2008) issued by the United Nations on the status of education in Guatemala today. This summary contains the following major sections:
The Magnitude, Character and Perception of Poverty in Guatemala
The Historical and Cultural Factors Contributing to Poverty in Guatemala
Exclusionary Forces in Guatemala’s Historical Pattern of Development
Education and Human Capital
Guatemala’s Civil War: Significant Costs for Long-Term Development
The 1996 Peace Accords: Toward a More Inclusive Course of Development
Guatemala Today and Into the Future

Section 1. The Magnitude, Character and Perceptions of Poverty in Guatemala

Poverty in Guatemala is very high. In 2000, over half of all Guatemalans (nearly 60%, or about 6.4 million people lived in poverty.) Even though international comparisons of poverty are difficult due to various measurement differences, available evidence does suggest that poverty in Guatemala is higher than in other Central American countries. It is also generally deeper and more severe. More recent statistics indicate that the percentage of Guatemalans living in poverty has been rising and is now estimated at closer to 64% with slightly over 30% living in extreme poverty – a level where families are unable to obtain the minimum daily caloric intake of food.

It is estimated that the minimum annual cost of eradicating poverty in Guatemala would represent about 8% of that country’s Gross Domestic Product (GDP). However, total government spending in Guatemala in 2000 was only about 13% of its GDP, with government spending on health and education amounting to only 3.6%, and government spending on social assistance equaling only 1.8% of its GDP. Recent data shows that increasingly larger amounts of government funding are now being directed to law enforcement to combat criminal violence and drug tafficking, and to emergency disaster relief efforts necessary because of the increasing effects of global climate change. Subsequently, less public monies are now being directed towards health, education and poverty eradication.

About two/thirds of all Guatemalan children live in poverty. Due to higher fertility rates among the poor, 68% of children under the age of six and 63% of children under the age of 18 live below the poverty line. The “poverty line” being defined as the yearly cost of food necessary to meet minimum caloric requirements plus a small percentage of that basic food cost added for essential non-food items such as housing, health-care, education and clothing.
Poverty is predominantly rural and extreme poverty is almost exclusively rural. Over 81% of the poor and 91% of the extreme poor live in the countryside. Three quarters of all rural residents fall below the poverty line.

Poverty is significantly higher among the indigenous population. Over three-quarters of the indigenous population live in poverty. In addition, there is a “poverty belt” in the Northern and North-Western regions of the country which is populated primarily by indigenous groups.

Guatemala is among the most unequal countries in the world in terms of wealth distribution. The population distribution in Guatemala is characterized by a large “low-income” majority and a very small “high-income” minority. In addition, there are significant inequities across ethnic groups and geographic areas. It is calculated that the top 1% of the population owns or controls 65% of the wealth, and that the top 5% owns or controls 85% of the wealth in Guatemala.

Malnutrition among Guatemalan children is extremely high – among the worst in the world. In terms of child growth attainment, Guatemala has an overall stunting rate of 49% of all children under five. Malnutrition is highly correlated with poverty and is much higher among rural and indigenous children than among their urban or non-indigenous counterparts.

Guatemala literacy is not only below average in Latin America, it is far lower. Illiteracy among women, the poor, indigenous and rural residents is particularly high. Guatemala is still a “primary” country with the average length of time in school at 3.5 years. Guatemala has seen some improvement in this area since the signing of the Peace Accords in 1996, but coverage is still low and biased against the poor. As with other indicators, enrollment and length of time in school are lower among girls, the poor, indigenous, and rural children. Availability of education at the secondary and above levels of education is even lower and more biased against disadvantaged groups than at the primary level. The most recent data indicates that the literacy rate is actually decreasing in Guatemala with a drop of nearly 5% in the literacy rate over the last four years.

How do Guatemalans perceive “poverty?” In a study of the perception of poverty in Guatemalan villages (QPES, Qualitative Poverty and Exclusion Study, World Bank 2001), most people equated poverty first with a lack of basic necessities such as food and clothing and lack of access to land or housing. Second, the majority of villagers surveyed linked poverty to inadequate public services, in particular education. Another study (van Hoegen and Palma, 1999.) found that a large share of those interviewed attributed poverty to a lack of education and training.

Communities do perceive that living conditions have improved since the Peace Accords and mainly attribute these gains to improvements in public services and education. In fact, education, particularly at higher levels, can serve as an elevator for upward economic mobility. Data from the Instituto National de Estadística-Guatemala, indicates that the higher the educational attainment of a household, the higher the household consumption, and hence the lower the chances a household lives in poverty. Overall, having someone in the household who has completed primary schooling raises consumption capacity by 23%. The gains are even stronger with higher levels of education. Having a member of the household who has completed secondary schooling raises consumption capacity by 46%, thus reducing the likelihood that a household will be poor.

Section 2. The Historical and Cultural Factors Contributing to Poverty in Guatemala

Guatemala’s high degree of poverty and exclusion did not emerge overnight. Factors, both historical and cultural, have fundamentally shaped Guatemala’s current levels of poverty and economic disparity. There are two predominant contextual factors in the makeup of Guatemala as a country: its rich cultural diversity and its geographic isolation. Within this context have operated key exclusionary forces in Guatemala’s historical pattern of development, including:
Massive land expropriation from the indigenous population which has resulted in one of the most unequal distributions of land in the world;
Official forced labor policies that exploited indigenous labor from the 1600’s through the middle of the 1900’s; and
Human capital accumulation, which has historically suffered from exclusionary education policies as part of a broader economic and political strategy, and as an outcome of the exclusionary land and labor policies.
Moreover, the long civil war from the 1960’s through the 1990’s imposed further costs on Guatemala’s development. The Peace accords, signed in December of 1996, not only yielded a formal end to the armed conflict, they also signaled a fundamental shift in Guatemala’s pattern of development, paving the way for a transformation to a more prosperous and inclusive nation. In the years since the signing of the Accords, Guatemala has taken important steps to further its development, with progress in public sector management, provision of basic services (primarily electrification), and some improvement in the coverage and equity of education.

Nonetheless, significant challenges remain. Changing the course of history in a short time span is not easy in any country. The hierarchical relations, attitudes, and institutional forces that have prevailed for centuries will not disappear overnight. Moreover, events such as Hurricane Mitch, Hurricane Stan, Tormenta Agatha, and other environmental shocks (earthquakes, flooding and mudslides, deforestation, etc.), as well as ongoing challenges with criminal violence and political corruption have all delayed implementation of the Peace Accords.

Those unimplemented components of the Peace Accords coincide largely with priorities for poverty reduction in Guatemala. In particular, progress in implementing the Peace Accords has been deficient for key development targets, especially those involving health and education outcomes and economic growth. These outcomes reflect the need for poverty reduction and improvement in living conditions, which are crucial for lasting peace.

The following are key elements to understanding the historical and contextual development of poverty and economic disparity in Guatemala: Guatemala is a physically diverse country, with many isolated areas. The country is divided into numerous distinct geographic zones, including forest highlands in the west, fertile lowland coasts, and tropical rainforests in Peten, the northernmost part of Guatemala. Two-thirds of the country is mountainous and volcanic, with most of the population living on land between 900 and 2,500 meters above sea level. Unfortunately, this natural resource diversity is being increasingly threatened by erosion, deforestation and population pressures on the land. The country is not physically united and many villages are fairly isolated, with long inter-village distances, due to an inadequate road network. Inter-village access is further hampered by often impassable roads (due to landslides, mudslides, flooding, etc.) during the rainy season.

Mirroring its physical diversity, Guatemala has a population rich in cultural and linguistic diversity. In a population of slightly over 13 million people, slightly more than half of the population is indigenous, including some 23 separate ethno-linguistic groups, 21 of which are Mayan in origin. The “Mayan” population lives primarily in hundreds of small, rural communities scattered throughout the western and central highlands.

Unfortunately, Guatemala’s diversity has historically been accompanied by conflict, exclusion, and a dualistic social and economic structure. Inequality between its ethnic groups is a pervasive feature in Guatemala. While the indigenous make up at least half of the population (actual percentages are difficult to determine because of different methods used to categorize indigenous and non-indigenous populations in Guatemala) they account for less than a quarter of total income. In contrast, economic and political resources remain concentrated among the economic elite of predominantly European descent and the Ladino population.

Unlike its topography and peoples, Guatemala’s economy is not so diverse. Agriculture still dominates the Guatemalan economy, accounting for a quarter of its Gross Domestic Product, and employs between 30-40% of its workers, usually providing only seasonable employment for harvest. The agricultural economy is still highly reliant on coffee and sugar, notwithstanding some minor success in promoting other non-traditional agricultural exports (pineapple, flowers, some vegetables, strawberries, etc.). Despite a fall in international prices, coffee still accounts for over 25% of all export earnings in Guatemala. Sugar, bananas and cardamom follow as the principal cash crops. Subsistence agriculture traditionally revolves around the production of corn and black beans, but has been diminishing in recent years due to soil exhaustion and subsistence farmers being relocated to provide more land for the NTAE (non-traditional agricultural exports) mentioned earlier.

Maquilas (free-trade factories and assembly operations) grew fairly rapidly during the late 1990’s and early 2000’s, but have now also been diminishing as more and more operations are being moved to China and other parts of Asia. Tourism strengthened after the signing of the Peace Accords and now accounts for approximately 20% of the GDP. Remittances (monies sent from family members working in other countries – primarily from the United States, where one out of every ten Guatemalans is currently living, both legally and illegally) are also an important source of income for Guatemalan families.

Section 3. Exclusionary Forces in Guatemala’s Historical Pattern of Development

Past policies have greatly contributed to an exclusionary pattern of development in Guatemala, particularly for land, labor and education. All of these spheres were intertwined with each other. They are also intimately connected with the development of coffee, Guatemala’s primary export crop. Throughout its history, land, labor and education policies were implemented to promote economic growth, but the indigenous and poor were excluded from benefiting from this growth, with capital continuing to accumulate in the possession of the wealthy elite.

The historical practice of expropriating land from the indigenous gained momentum with the development of agricultural exports, particularly coffee. The indigenous have consistently been divested of their land in Guatemala since the earliest days of the Spanish colonial conquest. Originally granted “ownership” over the land and all its inhabitants by the king of Spain, early Spanish colonists could claim land grants as large as how far their horse could travel in any one direction in a day. After independence from Spain in the early 1800’s, land privatization and expropriation continued with a significant acceleration in the late 1800’s which coincided with the spread of coffee. Coffee production depended on secure private property rights, which conflicted with the communally held property right approach used by the indigenous populations. By utilizing ladino-passed legislation which simplified converting communally-held indigenous lands into individually titled holdings, the economic elite of Guatemala was able to privatize large amounts of land into the formation of large plantations or fincas. This allowed for the creation of a class of large landowners who utilized these large fincas to take advantage of the expanding world market for coffee in the late 1800’s through the 1950’s. Since the ideal terrain for coffee occurs between 800-1,500 meters of altitude, the indigenous people who had been cultivating these lands were forced to locate to higher and less fertile grounds for their subsistence cultivation.

Such consolidations have continued up to recent times, as diversification of exports brought new expropriations from peasants. Guatemala’s economy has diversified in recent decades, though coffee still dominates the economy. During the country’s brief democratic period, from 1944-1954, the government introduced a series of agrarian reform measures, including laws to protect communal lands. These reforms were aborted with the CIA initiated military coup in 1954 (See the book “Bitter Fruit” for a more complete description of this period in Guatemalan history.) and land consolidation has continued. While communal lands accounted for 12% of agricultural land in 1950, this share had dropped to 1.1% by 1979. Between 1950 and 1970, the number of farm families – most of them indigenous – possessing parcels of land too small to provide subsistence incomes increased by 37% and the number of landless peasants increased to about one-fourth of the rural workforce, thus increasing the peasant’s dependence on seasonal labor to feed their families. Estimates from 1979 indicate that less than 2% of the population owned over 65% of the land, and that situation has not changed significantly in the last 25 years. Guatemala’s land inequality is among the most skewed in the developing world. In addition, women have been consistently denied the right to hold land, both legally and traditionally.

Guatemala’s economy has essentially grown on the backs of indigenous workers who have suffered numerous forms of mandatory forced labor. Indigenous labor in Guatemala has historically been viewed as an exploitable asset. In fact, land policies of the late 1800’s had the additional goal of reducing land available to subsistence farming and thus expanding the availability of a low-wage labor force. The expropriation of indigenous communal lands helped create rural unemployment by forcing families into marginal areas or leaving them without access to sufficient land. Such conditions were the precursors to the development of several legally enacted forms of forced labor:

Mandamiento: In 1877, the state instituted its mandamiento forced-labor system in which villages were required to supply coffee plantations with work crews of up to sixty people for periods of fifteen to thirty days.

Forced Work on Roads: In 1873, the government decreed that all able male citizens were obliged to provide free labor on public projects to build roads (which were developed so that the finca owners had an infrastructure upon which to transport their goods to markets.) Supposedly, this free work requirement applied to all, but in practice, only the indigenous population was forced to perform it.

Debt Servitude: Indentured labor also became common. Under this system, advances were provided to workers in anticipation of a certain amount of work; debts were then deducted from the worker’s harvest or in cash. Such debts commonly built up to levels high enough that the workers were essentially “owned” by the large land owners. Debts were monitored by local authorities who were authorized to arrest any defaulters.

Vagrancy Laws: The 1934 ley contra vagancia obliged landless peasants to work at least 150 days each year on plantations. Proof of service was required in each worker’s personal workbook, and the system was monitored and enforced by the government. In conjunction with ongoing land expropriations, an increasing number of indigenous were forced into these working conditions.

These forced labor laws remained in effect until the middle of the 20th century. During the country’s brief democratic experiment (from 1944-1954) the national government enacted the first Labor Code in 1947, providing for minimum wages and recognizing the freedom of workers to organize into unions. Another important step occurred with the Agrarian Reform Act of 1952, which prohibited all forms of servitude and slavery. This law was abandoned, however, in 1954, after the military coup removed the democratically elected government from power. The military coup also decreed that landowners could return to the practice of providing subsistence plots on their plantations in exchange for labor during the harvest season, a practice that continues up to the present day.

Section 4. Education and Human Capital

Throughout much of its history, education in Guatemala has been traditionally reserved for “citizens,” a status not fully extended to women or indigenous until 1945. The liberal government of 1871 instituted a substantial educational reform (for its time), shifting responsibility for providing education from the Catholic Church to the state, and making education free and “mandatory” (but exclusively for ladino males.) The policy was not implemented, however, as the state lacked the necessary resources (teachers or funds, much like the situation at the present time.) With the temporary introduction of a more democratic state in 1945 came educational reform, including a literacy campaign, the creation of the Instituto Indigenista Nacional (National Indigenous School), and a policy to officialize indigenous languages. Further policy changes were legislated in 1985 under the National Education Law, which emphasized decentralization and the participation of indigenous communities in the education system. This was the first time that a law asserted that the education system should take into account Guatemala’s ethnic diversity.

Section 5. Guatemala’s 36-year Civil War: Significant Costs for Long-Term Development

Guatemala’s was one of the longest of Latin America’s recent civil wars. Spanning 36 years (from 1960-1996), the war underwent several phases, only later involving the indigenous on a large scale. The first wave broke out in 1960 with a group of army officers revolting from within the army against government corruption. When the revolt failed, the officers fled to the countryside and launched the first phase of the war which was centered in the eastern regions and involved primarily the non-indigenous population. The second phase of the war broke out in the 1970’s, this time in the western highlands, with some indigenous communities becoming active participants. During the final and longest phase, from the late 1970’s through the late 1980’s social tensions exploded into a full scale civil war with active indigenous participation. It was not until this later phase that the indigenous population became a source of mobilization and support for the country’s guerrilla movement, and hence a perceived threat to the country’s powerful economic and military elites. The guerrilla military offensive reached its apex in 1980-81, gaining 6,000-8,000 armed participants and 250,000-500,000 active indigenous collaborators. In response, the military launched a major counter-insurgency effort, (with military assistance from the United States) that through scorched-earth warfare tactics, paramilitary operations, forced resettlement camps and the militarization of the entire administrative apparatus of the government, reached genocidal proportions with over 600 villages destroyed and between 200,000-250,000 people murdered, or “disappeared.”

Section 6. The 1996 Peace Accords: Towards a More Inclusive Course of Development

The Peace Accords aimed not only to formally end the armed conflict, but to reverse the country’s historically exclusionary pattern of development. Developments over the last ten years in Guatemala have been shaped in large part by two main factors, one of which was the signing of the Peace Accords in December, 1996. The four main areas of agreement involved:
(a) resettlement, re-incorporation and reconciliation issues for displaced Mayan communities;
(b) an integral human development program (including improved health and education);
(c) goals for productive and sustainable development; and
(d) a program for the modernization of the democratic state, including a strengthening of the capacity for participation and consultations of the distinct segments of Guatemalan society.
Three cross-cutting themes were also emphasized throughout the accords: the rights of indigenous communities, commitments regarding the rights and position of women, and the strengthening of social participation. The endurance of these main themes throughout the peace process bears testimony to their importance as priorities for the country.

Progress since the Peace Accords. In addition to bringing a formal end to the war, reducing the size of the military and creating a new civilian police force, progress has been achieved in several areas on the development side of the Peace Agenda, including:

Improving public financial management. Progress has been made at the national level in the management of public finances with the introduction and implementation of the Integrated Financial Management System in 1998. However, at both the national and local municipal level, there still continues the pattern of cronyism, corruption and connections to criminal activity, with few Guatemalans having a high confidence in their government officials.

Increasing tax revenues. In August 2001, the government increased the value added tax (IVA) from 10% to 12% in order to increase revenues as a key part of the Peace Agenda. Unfortunately this is a regressive tax, placing a greater burden on the poor than on the rich. In addition, since nearly 40% of the country’s economy is “informal,” tax evasion through under-reporting is commonplace. Given the nature of the continued relationship between government entities and the economically elite in Guatemala, it is highly unlikely that the Guatemalan government will enact tax laws that actually work towards greater wealth distribution or provide sufficient revenues to combat poverty on a significant scale.

Increasing public spending, particularly for certain sectors of the economy. Overall, public (government) spending has increased from 10.4% of the GDP in 1996 to 13.4% in 2000. During that time spending on education and basic services increased significantly. However, since 2000, spending has slowed considerably in those areas as the government places a higher priority on coping with an increase in violent crime as well as coping with disruptions in its agricultural exports due to a worldwide economic downturn and increasing fuel costs.
•Improving educational coverage. Guatemala did expend considerable sums of money to extend educational coverage through the construction of school buildings in areas where it would help to narrow disparities between genders, ethnicities and poverty groups. However, as in other areas, factors such as corruption, government inefficiency, instability in government due to cronyism (basically, the government undergoes major bureaucratic upheavals every four years when a new president is elected) and the lack of the yet to be developed “social participation” hoped for by the Peace Accords, have resulted in an educational system that lacks a clear academic focus and research-based teaching standards, and is less than reliable in its funding for teachers and educational resources.

Improving the coverage of basic utility services. Guatemala has made significant advances in the provision of basic utility services (water, sanitation, electricity, transportation, etc.) Throughout the country, people now have access to cell-phone coverage, cable television and improved highways between its major cities. Part of the success in part of its development is connected however, to that fact that many of these industries have strong financial connections to the economic and military elite.

Section 7. Guatemala Today and Into the Future

In many ways, Guatemala is better off than it was 25 years ago. However, there still remain many economic and social challenges to be addressed. While free-trade zones and “globalization” looked to be a path to economic development in the late 1990’s and early 2000’s, it has now become clear that those opportunities have moved on to more profitable low-cost production areas in Asia, thus leaving many empty factories and high unemployment in the urban areas (only 28% of Guatemalans actually have a steady job.) In addition, the promise of the development of NTAE’s (non-traditional agricultural exports) has also been shown to be environmentally damaging (because of the necessity for extensive chemical herbicide and fertilizer use) and economically costly and de-stabilizing (because it requires more capital than is generally available to the peasant farmer, thus causing him to lose his land when he is unable to cover start up costs for what looked to be a more “lucrative” crop.)

In addition, credit has become more readily available in Guatemala, thus leading to an increase in consumption by the small middle-class professional, yet there is an underlying concern that this expansion in the economy is not based on any real increase in wealth in the economy, but rather has many similarities to the “debt-servitude” situation that was the reality for many Guatemalans in the past. Most recently, skyrocketing increases in fuel prices along with increases in basic food costs has meant that a smaller and smaller percentage of a Guatemalan family’s income is now available for education and other non-survival items. This situation creates an awareness of the increasing discrepancy between what is seen as desirable (a TV, a car, nice clothes, etc.) and is being possessed by others around the world, and what is the reality for the poorest in Guatemala, thus leading to increased frustration and a propensity for criminal violence.

Population growth also continues to be a concern as it is projected that the Guatemalan population will double by the year 2040. Combine that with the limited availability of land for producing food, the rising cost of imported food and fuel, and the possible impact of global warming (it is estimated that if the sea level were to rise six centimeters, nearly 24% of Guatemala’s current land mass would be under water) and it becomes obvious that Guatemala’s economic and social problems are not likely to go away, but rather, will be likely to magnify and become more serious.

Even with these realities, the Guatemalan people are more often than not, a people of dignity and hope. They see their country struggling towards more stable and just democratic and economic structures. They understand education to be an extremely important contributor to the development of their families, their communities, and their country. And finally, they continue to believe that there can be better life for themselves and their children, if only given the opportunity.