Bridges Weekly Trade News Digest • Volume 13 • Number 5 • 12th February 2009
Guatemala TPR Urges Focus on Competitiveness
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Guatemala has continued to integrate economic liberalisation into its development strategy, a WTO review of the country’s trade policies concluded last week, but major challenges remain in achieving sustainable growth in income and poverty reduction. To further raise living standards, the country should keep promoting economic expansion, with a focus on enhancing its competitiveness in global markets, the review said.
Guatemala, the largest economy in Central America, has experienced steady growth rates in recent years, the WTO’s Trade Policy Review concluded. Between 2001 and 2006 the real gross domestic product expanded at 3.4 per cent, rising to 5.7 per cent in 2007. However, analysts expect that the final data for 2008 will reveal a decrease in growth largely due to the economic slowdown in the United States, Guatemala’s largest trading partner.
Guatemala’s single largest export is clothing, but the sector has struggled to compete with the US clothing market since the expiration in 2005 of the WTO’s Agreement on Textiles and Clothing, which regulated quotas in the sector.
Agriculture also makes significant contributions to the country’s productive output and is responsible for 36.1 per cent of employment in Guatemala. The country gives this sector limited support in the form of tariffs and certain subsidies, the report concluded. Coffee, sugar, and bananas continue to be Guatemala’s main agriculture exports.
In the energy sector, the report noted that in 2006 Guatemala produced more than 16,000 barrels of oil per day, while consumption of petroleum and petroleum products was more than four times that amount. Fossil fuels are used to produce an average of half the energy generated in the country.
On alternative energy sources, the review noted that Guatemala produces a relatively small amount of ethanol, most of which is exported to the US. According to UNCTAD, the country has the capacity to further develop its ethanol output for both domestic use and for export.
In the financial sector, 2006-2007 brought serious problems for the Guatemalan banking system. In October 2006, what was then the country’s fourth largest bank (Banco del Café, S.A.) was forced to cease operations after the institution failed to comply with regulations. In January 2007, the government shut down operations at another bank due to over-lending.
Since then, though, the report noted that Guatemala has enacted laws and regulations to reform its financial sector. However, further such measures are needed, the review said, especially with regards to insurance and risk management procedures. The services sector contributes almost 60 per cent of GDP and generates some two thirds of total employment.
The WTO secretariat conducts periodic reviews of all of its Members’ trade policies. This was Guatemala’s second review; its first was conducted in 2002.
To read the full Trade Policy Review, visit http://www.wto.org/english/tratop_e/tpr_e/s210-04_e.doc
ICTSD reporting.
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