Guatemala needs to build an ‘economic wall’ to be safe and prosperous

On my recent visit to Guatemala as an international election observer, I witnessed the numerous challenges newly-elected President Alejandro Giammattei will face — and issue not just for his country but for the United States as well, if Washington hopes to reduce the flood of undocumented immigrants from Central America.

The challenges for Giammattei include a growing youth population, poverty and corruption. However, as with all times of transition, there is an opportunity for the new administration to find solutions to these problems. President Giammattei should take advantage of Guatemala’s untapped potential, including the agribusiness, mining and tourism industries.

One of Guatemala’s biggest challenges is its demography. There is an enormous youth bulge, with almost half of the population under the age of 19. The country’s economy has been growing at 2.8 percent in 2017 and 3.1 percent in 2018 and is forecast to grow by 3.4 percent in 2019, above its neighboring countries. The population is forecast to grow from 17.6 million people in 2019 to 26.9 million in 2050. Despite the economy’s growth of the last couple of years, it needs to grow at a much faster rate to absorb the growing youth population. Young people will either find jobs, do something less productive with their time, or migrate. Job creation and greater economic growth should be a top priority for the new administration to absorb all of these young people into Guatemala’s economy.

President Giammattei, who assumes office in January, also faces challenges from widespread poverty. Almost 60 percent of the population lives below the national poverty line and 23 percent lives in extreme poverty. For a country with significant agricultural wealth, it also has a substantial child malnutrition affecting almost half of all children under the age of five. Making matters worse, Guatemala has some of the lowest taxes collected in the world.

In spite of these challenges, Guatemala does have enormous potential in the mining, agribusiness and tourism industries.

Guatemala has significant deposits of gold, silver, nickel, tin and other resources which have made it a “go-to” mining destination. In 2010, gold accounted for 46 percent of its mining industry and, in 2017, Guatemala had the 15^th largest silver production in the world. The mining industry has significant potential, and international companies, including the Canadian companies Goldcorp, Inc. and Tahoe Resources, have started mining in Guatemala.

However, local indigenous groups have opposed several of these projects over concerns regarding land and water resources. Although Guatemala is a signatory to the International Labor Organization Convention (ILO 169) — the major binding international convention concerning indigenous rights — there is no unified law to regulate this interaction. If the government and mining companies could come to an agreement with the indigenous peoples, and resources are managed right — in similar ways to Chile or Botswana — mining could be an important source of prosperity for the country.

Moreover, almost 30 percent of the labor force employment is in agriculture. However, the sector has low productivity and the products lack value-add. Guatemala needs to work to increase production and diversify its products to take advantage of its natural resources, which include forestry, coffee and spices.

There are also possibilities to develop the tourism industry. Guatemala has unique microclimates and a vibrant culture. Its tourism assets include the historic and cultural heritage of Mayan Cities and natural sights such as mountains, volcanoes and lakes. In 2019, Guatemala had around 2 million tourists and generated $1.2 billion in revenue from the industry. Comparatively, Costa Rica attracted 3 million tourists and brought in $1.7 billion in tourism earnings. Why is Costa Rica’s tourism industry more successful?

Weak infrastructure and safety concerns are two of the reasons why Guatemala’s tourism industry falls behind that of Costa Rica. Guatemala has poor road conditions and horrible traffic which hinders tourists from reaching some of the unique history and natural beauty the country has to offer. Additionally, tourists are dissuaded from visiting Guatemala over safety concerns. Corruption in Guatemala hinders the government’s ability to deal with gang and narcotics-related criminal activity across the country.  

If Guatemala has three or four effective presidents — hopefully starting with Giammattei — who invest in economic growth, infrastructure and anti-corruption measures, it has all the potential to follow the path of Costa Rica or Panama. President Giammattei can begin this process by fulfilling his campaign platform — to build an “economic wall” through job creation.

Guatemala also plays a role in President Trump’s agenda to solidify the wall between the U.S. and Mexico borders. Right before President Giammattei’s election, his predecessor — President Jimmy Morales — made a very unpopular deal with the U.S. Department of Homeland Security, known as the “safe third country” agreement. The agreement forces all migrants coming from El Salvador and Honduras, seeking asylum in the U.S., to apply for asylum in Guatemala first. Guatemala currently does not have the ability to process and absorb a large number of asylum seekers because of endemic poverty, low formal job creation, and high levels of violence. It relies on U.S. assistance, and it’s likely that Giammattei will reluctantly go along with the deal.

Corruption will remain an endemic problem that President Giammattei must address if he wants to tap into the mining and tourism industries, and work on job creation. The Bush and Obama administrations supported the International Commission against Impunity in Guatemala (CICIG), which was designed to investigate and prosecute illegal security groups and criminal groups that have infiltrated state institutions to undermine democratic gains. Giammattei’s predecessor ended the mandate and expelled the commissioner Ivan Velasquez. For the last year, there has been an attempt to try and put CICIG back together. In the most recent election, both President Giammattei and his opponent came out against renewing the mandate. If CICIG is not reinstated, President Giammattei needs to think about what steps he wants to take to strengthen rule of law.

President Giammattei faces challenges with a growing youth population, poverty, and corruption. However, if he starts working on job creation for the youth, develops the agribusiness, mining and tourism industries, and engages in the battle on corruption, he can start moving Guatemala towards a path of safety and prosperity.

Daniel F. Runde is a senior vice president and William A. Schreyer chair in Global Analysis at the Center for Strategic and International Studies. He previously worked for the U.S. Agency for International Development, the World Bank Group, and in investment banking, with experience in Africa, Asia, Europe, Latin America, and the Middle East.