MOREPRESS RELEASE
EMBARGO:  NOT FOR PUBLICATION UNTIL
13:00 GMT 18 JANUARY 2002
PRESS/TPRB/184
18 January 2002
(02-0237)
 GUATEMALA'S STRATEGY OF LIBERALIZATION HAS CONTRIBUTED TO
PROMOTING GROWTH AND MUST BE KEPT UP
Guatemala's multi-pronged strategy aimed at ach ieving sustainable economic growth through
economic liberalization and public-sector modernizat ion has contributed to promoting growth, which,
however, needs to be sped up to improve living conditions, according to a WTO Secretariat report on
the trade policies and practices of Guatemala.
The WTO Secretariat report, along with the policy statement by the Government of
Guatemala, will serve as a basis for the first Trade Policy Review (TPR) of Guatemala by the Trade
Policy Review Body of the WTO on 16 and 18 of January 2002.
The report says that in recent years, trade has played an important role in promoting growth in
Guatemala.  Increases in exports have outpaced GDP each year since 1996.  There has beenconsiderable progress in reducing tariff and non-tariff trade barriers, although protection remains
significant in a few areas.
The report adds that economic growth in Guatemala has been steady but will need to be
stepped up to effect a significant improvement in living standards.  This will require in particular a
consolidation of, and further forward movement in, Guatemala's liberalization efforts.  In trade-relatedareas, further initiatives may be required to achieve greater efficiency in the domestic market,
including by continuing with the privatization programme and strengthening pro-competitive policies
and regulations.
Guatemala has Central America's largest economy, with a population of 11.4 million and a
per capita GDP of close to US$1,700.  Between 1995 and 1998 real GDP grew at an average annualrate of about 4.4%;  subsequently, stagnant private consumption and reduced investment spending led
to a slowdown in 1999 and 2000, with GDP growth rates of 3.6% and 3.3% respectively.  Despite this
relatively solid growth performance, due to Guatemala's strong population growth, per capita GDPPRESS/TPRB/184
Page 2
MOREhas expanded too slowly to improve living standards significantly;  poverty thus continues to be a
serious problem.
The United States is Guatemala's most important trading partner, being the market for 36% of
Guatemalan exports and the source of  40% of its im ports.  Other important trading partners are other
members of the Central American Common Market, the European Union, and Mexico.  Between 1995
and 2000, the U.S. dollar value of Guatemalan imports grew at an average rate of 8.2% annually, wellabove the 6.9% growth rate of exports, reflecting in great part unfavourable terms of trade.
Agricultural goods (WTO definition) account for about 60% of Guatemalan exports and
generate about 23% of the country's GDP.  Despite their declining shares in total exports, coffee,
sugar, and bananas continue to be Guatemala's strong est export products.  Over the past years, tourism
and exports of apparel and non-traditional agricultural products have increased in importance.
Intermediate and capital goods dominate Guatemala's imports.  The reports notes, however, that
Guatemala's official commodity trade statistics do not include flows from free trade zones andmaquila enterprises.
The report also notes that Guatemala grants at least MFN treatment to all its trading partners.
Tariffs are Guatemala's main instrument of border protection;  the average applied MFN rate is 7.0%.
Agricultural imports (WTO definition) are levied an average tariff of 10.2%, while non-agricultural
products excluding petroleum are levied a 6.4% tariff on average.  Alcoholic beverages and spiritsface the highest tariffs with an average rate of 24.8%.  Guatemala maintains import tariff quotas for a
number of agricultural products under its Uruguay Round minimum access commitments.
In the Uruguay Round, Guatemala bound all its tariffs.  While non-agricultural products were
bound at a ceiling rate of 45%, Guatemala's final bound rates for agricultural products range from
10% to 257%.  Closing the wide margin between applied and bound rates would further increase thepredictability of market access conditions.
Tariff reductions under preferential agreements have contributed to improved access to the
Guatemalan market for partners.  Duty-free access is offered to most imports from the Central
American Common Market.  Preferential tariffs are also offered to Mexico under a bilateral free-trade
agreement, and to Colombia, Cuba, Panama, and Venezuela.  However, the number and scope ofGuatemala's preferential initiatives combined with its institutional weakness, raise concerns.
Irrespective of their origin and in accordance  with the national treatment principle, imports
are subject to domestic taxes, most notably a 12% value-added tax, applicable on the c.i.f. value of
imported goods.  In addition, various goods, such as alcoholic beverages, cement, and vehicles, are
subject to specific consumption taxes.
In order to strengthen customs procedures, Guatemala obtained a delay until November 2001
on the application of the WTO Agreement on Customs Valuation.  Minimum import prices for
customs valuation purposes are in place for rice, used clothes, and second-hand vehicles.  A new
customs law is expected to be enacted in 2002.
The use of non-tariff trade barriers appears limited.  Guatemala maintains various import
restrictions and prohibitions, which apply equally to all trading partners, for reasons of security,
health, and environmental protection.  Guatemala has not taken recourse to contingency measures,with the exception of one anti-dumping case, whic h was withdrawn by the authorities after a panel
was established to examine its WTO consistency.PRESS/TPRB/184
Page 3
MOREThe industrial sector, including manufacturing, construction, mining, electricity and water,
accounts for 20% of GDP.  Manufacturing, which accounts for some 13% of GDP, is largely
concentrated in the processing of agricultural pr oducts, geared to the domestic, Central American and
U.S. markets.  Other important manufacturing subs ectors are footwear, textiles, metals, and chemical
products.
The services sector contributes some 57% to GDP, with commerce being the dominant
subsector.  Pursuant to the Foreign Investment Law, market access to most services sectors on a non-
discriminatory basis is guaranteed to foreign inve stors.  Despite the significant improvement made in
upgrading the Guatemala's infrastructure, problems remain in certain sectors, such as financial
services and port facilities.
Market access to financial services is regulated by specific sectoral legislation.  Subject to
approval of the regulatory authorities, insurance companies and banks may incorporate a Guatemalan
enterprise.   State-owned enterprises continue to operate in financial services, maritime transports andtelecommunications;  however, they represent only a minor share of the respective sector's output.
Minimum local capital requirements are in place only in the transport sector.  The enactment of a new
Telecommunications Law in 1996, together with the privatization of the state-owned
telecommunications company, prepared the ground fo r the rapid growth observed in this sector in
recent years.  Tourism has developed into an important source of foreign exchange, generating morethan US$500 million annually.
Note to Editors
Trade Policy Reviews are an exercise, mandated in the WTO agreements, in which member
countries’ trade and related policies are examined and evaluated at regular intervals. Significant
developments which may have an impact on the global trading system are also monitored. For each
review, two documents are prepared: a policy stat ement by the government of the member under
review, and a detailed report written independently by the WTO Secretariat. These two documents are
then discussed by the WTO’s full membership in the Trade Policy Review Body (TPRB). Thesedocuments and the proceedings of the TPRB’s meet ings are published shortly afterwards. Since 1995,
when the WTO came into force, services and trade- related aspects of intellectual property rights have
also been covered.
For this review, the WTO’s Secretariat report, together with a policy statement prepared by
the Government of Guatemala, will be discussed by the Trade Policy Review Body on 16 and 18
January  2002. The Secretariat report covers the development of all aspects of Guatemala trade
policies since the previous review, including domestic laws and regulations, the institutional
framework, trade policies by measure, and developments in selected  sectors.
Attached to this press release are the Summary Observations of the Secretariat report and
parts of the government policy statement. The Secretariat and the government reports are availableunder the country name in the full list of trade policy reviews at
http://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm . These two documents and the minutes of the
TPRB’s discussion and the Chairman’s summing up, will be published in hardback in due course and
will be available from the Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva
21.PRESS/TPRB/184
Page 4
MORESince December 1989, the following reports have been completed: Argentina (1992 and
1999), Australia (1989, 1994 and 1998), Austria (19 92), Bahrain (2000) Bangladesh (1992 and 2000),
Benin (1997), Bolivia (1993 and 1999), Botswa na (1998), Brazil (1992, 1996 and 2000), Brunei
Darussalam (2001), Burkina Faso (1998), Cameroon (1995 and 2001), Canada (1990, 1992, 1994,
1996, 1998 and 2000), Chile (1991 and 1997), Colombia (1990 and 1996), Costa Rica (1995 and
2001), Côte d’Ivoire (1995), Cyprus (1997), th e Czech Republic (1996 and 2001), the Dominican
Republic (1996), Egypt (1992 and 1999), El Salvador (1996), the European Communities (1991,
1993, 1995, 1997 and 2000), Fiji (1997), Finland (1992), Gabon (2001), Ghana (1992 and 2001),
Guinea (1999), Hong Kong (1990, 1994 and 1998),  Hungary (1991 and 1998), Iceland (1994 and
2000), India (1993 and 1998), Indonesia (1991, 1994 and 1998), Israel (1994 and 1999), Jamaica
(1998), Japan (1990, 1992, 1995,1998 and 2000), Keny a (1993 and 2000), Korea, Rep. of (1992, 1996
and 2001), Lesotho (1998), Macao (1994 and 2001), Madagascar (2001), Malaysia (1993, 1997 and
2001), Mali (1998), Mauritius (1995 and 2001), Mexico (1993 and 1997), Morocco (1989 and 1996),Mozambique (2001), New Zealand (1990 and 1996) , Namibia (1998), Nicaragua (1999), Nigeria
(1991 and 1998), Norway (1991, 1996 and 2000), OECS  (2001), Pakistan (1995), Papua New Guinea
(1999), Paraguay (1997), Peru (1994 and 2000), the Philippines (1993 and 1999), Poland (1993 and
2000), Romania (1992 and 1999), Senegal (1994), Singapore (1992, 1996 and 2000), Slovak Republic
(1995 and 2001), the Solomon Islands (1998), S outh Africa (1993 and 1998), Sri Lanka (1995),
Swaziland (1998), Sweden (1990 and 1994), Sw itzerland (1991, 1996 and 2000 (jointly with
Liechtenstein)), Tanzania (2000), Thailand (1991, 1995 and 1999), Togo (1999), Trinidad and Tobago
(1998), Tunisia (1994), Turkey (1994 and 1998), the United States (1989, 1992, 1994, 1996, 1999 and
2001), Uganda (1995 and 2001), Uruguay (1992 and 1998), Venezuela (1996), Zambia (1996) and
Zimbabwe (1994).PRESS/TPRB/184
Page 5
MORETRADE POLICY REVIEW BODY
GUATEMALA
Report by the Secretariat – Summary Observations
In recent years, trade has played an important role in promoting growth and development in
Guatemala.  Increases in exports have outpaced GDP each year since 1996.  There has been
considerable progress in reducing tariff and non-tariff trade barriers, although protection remains
significant in a few areas. Most restrictions to foreign investment have also been eliminated, and a
wide-ranging privatization programme has led to reduced state involvement in production activities
and increased efficiency in key activities.  Moreover, legislation to improve government procurementregulations and the protection of intellectual property rights has been adopted.  These efforts have
been part of a multi-pronged strategy that encompasses unilateral, regional, and multilateral initiatives
aimed at achieving sustainable economic growth through economic liberalization and public-sector
modernization.
Economic growth in Guatemala has been steady but will need to be stepped up to effect a
significant improvement in living standards.  This will require in particular a consolidation of, and
further forward movement in, Guatemala's liberalization efforts.  In trade-related areas, further
initiatives may be required to achieve greater efficiency in the domestic market, including by
continuing with the privatization programme and strengthening pro-competitive policies and
regulations.  Non-distortionary sectoral policies will  need to be favoured, bearing in mind that export-
promotion programmes often result in discrimination against domestically oriented activities.
Consolidation of Guatemala's liberalization efforts would also be aided through specific capacity-
building programmes.  Ultimately the success of these efforts is contingent upon securing lasting
institutional stability.  In all these areas the international community can continue to play an important
role.
Guatemala has Central America's largest economy, with a population of 11.4 million and a
per capita GDP of close to US$1,700.  Since the signing of the Peace Accords in December 1996,
which ended 36 years of internal armed conflict, one of the main objectives of the authorities has been
to achieve stable and sustainable economic growth.  Between 1995 and 1998 real GDP grew at an
average annual rate of about 4.4%;  subseque ntly, stagnant private consumption and reduced
investment spending led to a slowdown in 1999 and 2000, with GDP growth rates of 3.6% and 3.3%
respectively.  Despite this relatively solid growth performance, due to Guatemala's strong population
growth, per capita GDP has expanded too slowly to  improve living standards significantly;  poverty
thus continues to be a serious problem.
In order to meet an agreed Peace Accords target to fund social programmes, efforts are being
made to expand tax revenue;  for this purpose, the value-added tax was increased to 12% in mid 2001.
The Government has also undertaken efforts to strengthen the tax administration and broaden the taxbase, although tariffs and value-added tax on imports still account for a large part of state income.
The fiscal deficit has ranged between 0.1% and 2.8% since 1995.
Guatemala maintains a flexible exchange rate system;  the Central Bank intervenes in the
market only to moderate exchange rate fluctuations.  A law passed in late 2000 allows the free
circulation of machinery and transport equipment, food products, fuels, and chemicals.  The upward
trend in the share of fuels in total merchandise imports reflects the increases in world prices of foreignPRESS/TPRB/184
Page 6
MOREcurrency, with a view to increasing confidence in the banking system.  Disciplined financial policy
has contributed to a reduction in inflation from double-digit rates at the beginning of the 1990s to 5%
in 2000, and has played a role in keeping the exchange  rate to the U.S. dollar relatively stable since
1999.  Real interest rates have shown a rising trend in recent years and reached almost 15% in 2000.
Guatemala's current account has registered important deficits in recent years, due mainly to
persistent and growing trade deficits.  The deficit has been financed largely by remittances andprivatization income.  Returning capital and privatization inflows increased international reserves to
nearly US$1.9 billion in 2000, equivalent to five months of total imports.
The United States is Guatemala's most important trading partner, being the market for 36% of
Guatemalan exports and the source of  40% of its im ports.  Other important trading partners are other
members of the Central American Common Market, the European Union, and Mexico.  Between 1995
and 2000, the U.S. dollar value of Guatemalan imports grew at an average rate of 8.2% annually, well
above the 6.9% growth rate of exports, reflecting in great part unfavourable terms of trade.
Agricultural goods (WTO definition) account for about 60% of Guatemalan exports.  Despite
their declining shares in total exports, coffee, sugar,  and bananas continue to be Guatemala's strongest
export products.  Over the past years, tourism and exports of apparel and non-traditional agricultural
products have increased in importance.  Intermediate and capital goods dominate Guatemala's
imports.
Guatemala is in the process of consolidating its legal and institutional framework;  the
strengthening of governance is a priority and a necessary condition for Guatemala to achieve its
ambitious development objectives.  The Ministry of Economy is the lead agency for all issues related
to foreign trade.  Guatemala joined the GATT in 1991 and became a WTO Member in July 1995.  As
an international treaty, the WTO Agreements take precedence in Guatemala over domestic legislation.Guatemala has been active in the multilateral trading system, taking part in the negotiations on
telecommunications services, and making use of the dispute settlement mechanism on a few
occasions.  Guatemala has also participated in the mandated negotiations on services and, as a
member of the Cairns Group, on agriculture.
Guatemala has increasingly participated in preferential trade arrangements;  the Central
American Common Market is at the centre of its regional trade relations.  Guatemala has a Free Trade
Agreement (FTA) with Mexico, now supported by new initiatives for closer physical integration
between the two and with other countries in the region.  Negotiations for FTAs with Canada, Chile,
the Dominican Republic, and Panama have been initiated or concluded;  the Agreement with the
Dominican Republic was expected to enter into force in late 2001.  Further negotiations with ElSalvador, Honduras, and Nicaragua on the formation of a customs union, and an agreement on trade
in services and investment are under way.  Guatemala also has Partial Scope Agreements with
Colombia, Cuba, and Venezuela, and participates in the negotiating groups of the Free Trade Area of
the Americas.
The number and scope of these preferential initiatives, each imposing its own negotiating and
implementation demands, combined with Guatemala’s institutional weaknesses, raises questions
about its capacity to participate effectively in all such initiatives.  New FTAs are compounding tradepolicy implementation difficulties by, inter alia, requiring the administration of different tariff-
reduction programmes and rules of origin.  Incompatibilities between agreements may also emerge,
for example with respect to customs valuation or safeguard measures;  provisions in some of
Guatemala’s FTAs take precedence over multilateral rules.PRESS/TPRB/184
Page 7
MOREBetween 1996 and 1998, Guatemala implemented an ambitious privatization programme;
however, the programme has since slowed considerably and a number of enterprises, mostly in the
services sector, remain state-owned.  The privatization programme was accompanied by the
enactment of new telecommunications and electricity laws that ended state monopolies in these
sectors and opened them to private-sector partic ipation.  The Foreign Investment Law of 1998 grants
national treatment to all foreigners with only few sectoral exceptions, notably transport.
Guatemala grants at least MFN treatment to all its trading partners.  Tariffs are Guatemala's
main instrument of border protection;  the averag e applied MFN rate is 7.0%.  Agricultural imports
(WTO definition) are levied an average tariff of 10.2%, while non-agricultural products excluding
petroleum are levied a 6.4% tariff on average.  Alcoholic beverages and spirits face the highest tariffs
with an average rate of 24.8%.  Guatemala maintains import tariff quotas for a number of agricultural
products under its Uruguay Round minimum access commitments.
In the Uruguay Round, Guatemala bound all its tariffs.  While non-agricultural products were
bound at a ceiling rate of 45%, Guatemala's final bound rates for agricultural products range from
10% to 257%.  Closing the wide margin between applied and bound rates would further increase the
predictability of market access conditions.
Tariff reductions under preferential agreements have contributed to improved access to the
Guatemalan market for partners.  Duty-free access is offered to most imports from the CentralAmerican Common Market.  Preferential tariffs are also offered to Mexico under a bilateral free-trade
agreement, and to Colombia, Cuba, Panama, and Venezuela.
Irrespective of their origin and in accordance  with the national treatment principle, imports
are subject to domestic taxes, most notably a 12% value-added tax, applicable on the c.i.f. value of
imported goods.  In addition, various goods, such as alcoholic beverages, cement, and vehicles, aresubject to specific consumption taxes.
In order to strengthen customs procedures, Guatemala obtained a delay until November 2001
on the application of the WTO Agreement on Customs Valuation.  Minimum import prices for
customs valuation purposes are in place for rice, used clothes, and second-hand vehicles.  A new
customs law is expected to be enacted in 2002.
The use of non-tariff trade barriers appears limited.  Guatemala maintains various import
restrictions and prohibitions, which apply equally to all trading partners, for reasons of security,
health, and environmental protection.  Guatemala has not taken recourse to contingency measures,
with the exception of one anti-dumping case, whic h was withdrawn by the authorities after a panel
was established to examine its WTO consistency.
Legislation on free-trade zones and maquila enterprises constitute Guatemala's main
instruments for export promotion.  Pursuant to these arrangements, exporting enterprises may, under
certain conditions, benefit from exemptions from import duties and various internal taxes.  Guatemala
does not make use of official export credits or insurance programmes to promote exports.
Guatemala benefits from various GSP schemes and the unilateral U.S. Caribbean Basin
Initiative.  Guatemalan raw cane sugar exports to the United States benefit from preferential tariff
quotas.  Guatemala's textiles and clothing exports to the United States are also subject to quotas.Export quotas are in place for products covered by the WTO Agreement on Textiles and Clothing.
Guatemala maintains export taxes only for the coffee sector.PRESS/TPRB/184
Page 8
MOREGovernment procurement is regulated by the Government Contracts Law of 1992, which
accords national treatment to foreign suppliers of goods and services.  Guatemala does not have a
comprehensive legal framework for competition pol icy but the authorities are preparing such a
framework.  Although there are sector-specific regulations to ensure that domestic markets remain
competitive, the information available suggests that co mpetition is restricted in some key sectors, such
as financial services.
The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
became part of Guatemala's legislation through its ratification of the Marrakesh Agreement.
Subsequently, Guatemala has undertaken legal and administrative reforms to facilitate the protection
of intellectual property rights, such as the enactment of new copyright and industrial property laws.
Annual registrations of intellectual property rights have increased substantially since 1995.
Agriculture generates about 23% of Guatemala's GDP.  Despite its decreasing share in GDP,
agriculture remains a central sector of the Guatemalan economy due to its contribution to employmentand export earnings.  However, Guatemala's two main agricultural exports, coffee and sugar, have
come under considerable pressure in recent years due to adverse international market conditions.
The industrial sector, including manufacturing, construction, mining, electricity and water,
accounts for 20% of GDP.  Manufacturing, which accounts for some 13% of GDP, is largely
concentrated in the processing of agricultural pr oducts, geared to the domestic, Central American and
U.S. markets.  Other important manufacturing subs ectors are footwear, textiles, metals, and chemical
products.
Guatemala's special fiscal arrangements for free trade zones and maquila enterprises appear to
have favoured particularly the production of various non-traditional goods, although no precise
estimates exist.  These goods comprise agricultural products such as cut flowers and specialtyvegetables, fishery products such as shrimps, and manufactures, in particular textiles and apparel.  As
foreign trade under these special arrangements is no t recorded, actual exports in these sectors as well
as imports of necessary inputs may be underestimated in official trade statistics.
The services sector contributes some 57% to GDP, with commerce being the dominant
subsector.  Pursuant to the Foreign Investment Law, market access to most services sectors on a non-discriminatory basis is guaranteed to foreign investors.  Market access to financial services is
regulated by specific sectoral legislation.  Subject to approval of the regulatory authorities, insurance
companies and banks may incorporate a Guatemalan enterprise;  foreign banks may also establish
branches or subsidiaries.
Guatemala's commitments under the GATS are relatively limited, covering only five service
categories, as they bound the policy framework in place before the beginning of Guatemala's
privatisation programme and the enactment of the Foreign Investment Law.
State-owned enterprises continue to operate in financial services, maritime transports and
telecommunications;  however, they represent only a minor share of the respective sector's output.
Minimum local capital requirements are in place only in the transport sector.  The enactment of a new
Telecommunications Law in 1996, together with the privatization of the state-owned
telecommunications company, prepared the ground fo r the rapid growth observed in this sector in
recent years.  Tourism has developed into an important source of foreign exchange, generating more
than US$500 million annually.  Despite the significant improvement made in upgrading the
Guatemala's infrastructure, problems remain in certain sectors, such as financial services and port
facilities.PRESS/TPRB/184
Page 9
MORETRADE POLICY REVIEW BODY
GUATEMALA
Report by the Government of Guatemala – Part II
Changes in the economic environment
A series of stabilization and structural adjustment measures were introduced in Guatemala
from 1991 onwards with the aim of increasing economic efficiency through the implementation of
measures to control inflation, strengthen the balance-of-payments and seek to create suitable
conditions for sustainable economic growth.  This involved a series of structural reforms in the areas
of trade, finance, public administration, monetary policy and fiscal policy, etc.  Thus, economic
performance in the period 1991-2000 was marked by the effects of the application of these measures,
as well as by the efforts to adapt the domestic economy to the demands of the economic globalization
process and to non-economic factors.
The period in question was marked by general price stability as a result of the efforts of the
monetary authority to match the levels of liquidity to the requirements of the economy and thus bring
about a gradual reduction in inflation.  Accordingly, the variation in domestic prices showed a
downward trend, with an average rate during the period of 9 per cent.  It should be added that in the
last four years inflation has averaged 6.1 per cent.
In recent years the basic objective of monetary, exchange and credit policy has been to
promote general price stability based on the conviction that that this is the best contribution that this
policy can make to achieving sustainable growth in production and employment and, consequently, to
the orderly development of the domestic economy.  Accordingly, in 2000 the strategy underlying the
monetary, exchange and credit policy was directed to restoring confidence in the currency andstrengthening the domestic financial system.  This strategic objective called for the disciplined
application of policy measures aimed at ensuring:  (a) a disciplined monetary policy;  (b) the
strengthening of the domestic financial system through modernization of the regulatory framework;
and (c) fiscal discipline.
In response to the challenges arising from the worldwide globalization process, at the end of
1989 the monetary authority decided to introduce great er flexibility into the foreign exchange market.
Accordingly, from 1994 onwards the exchange rate a nd the exchange allocation in that market were
allowed to find their own levels.  In addition, in 1996 the electronic system for foreign currency
transactions (SINEDI) came into operation, on the principle of bringing certainty and transparency to
operations carried out in the market by guaranteeing freedom in foreign exchange operations to
economic agents.
The balance-of-payments current account deficit as a percentage of the GDP exceeded 5 per
cent in some years during the last decade.  It should be pointed out that in those years the current
account deficit was financed, inter alia , by a net inflow of foreign capital which led to an increase in
the International Currency Reserves.
In 2000 the balance-of-payments current account balance as a percentage of GDP fell as
compared with the previous year, going from 5.5 per cent in 1999 to 4.8 per cent in 2000.  This resultwas helped by the performance of services and transfers, which recorded surpluses higher than in thePRESS/TPRB/184
Page 10
MOREprevious year.  In addition, in 1998 direct foreig n investment amounted to US$673 million as a result
of strong privatization activity.
During the last decade economic policy measures have also been introduced with a view to
the economic modernization of the country, encouraging a greater opening up of the domestic
economy and a better allocation of resources.  Consequently, during the period 1991-2000 the GrossDomestic Product (GDP) grew at an annual rate of 4.1 per cent, leading to a relative improvement in
the per capita income of the population.  It should be added that in recent years the country's
economic growth has been affected by various factors,  in particular the external shocks that have led
to a deterioration in the terms of trade, the damage caused by hurricane Mitch and the global
economic slowdown.
At the beginning of the decade the central government found itself in a critical situation with
a fiscal deficit of around 2 per cent.  That meant raising funds to cover current expenditure and left noroom for any increase in investment.  As a result, it became imperative to revise the fiscal policy with
a view to eliminating the above-mentioned deficit and avoiding an increase in the foreign debt.  By
the end of 2000 the fiscal deficit as a percentage of GDP amounted to 1.8 per cent and the tax burden
stood at 10.1 per cent.
The total trade in goods, that is to say exports together with imports, increased between 1991
and 2000 at an annual cumulative rate of 10.5 per cent.  Exports grew at an annual cumulative rate of
9.2 per cent, reaching an f.o.b. value of US$2,708.5 million in 2000, while imports increased at an
annual cumulative rate of 11.4 per cent, standing in 2000 at a c.i.f. value of US$4,885.3 million.
In the growth in the value of exports it is important to draw attention to the increase recorded
in exports of coffee and bananas, as well as of other products, to the rest of the world and to CentralAmerica.  With regard to imports there were considerable increases recorded in consumer goods,
capital goods, raw materials, and fuel and lubricants.
A fundamental objective of the country's economic policy in recent years has been to reduce
the role of the State in the economy and promote gr eater private sector participation.  Accordingly,
from 1996 onwards as part of the economic policy measures directed towards the economicmodernization of the country the government initiated a process of disposing of State assets through
the sale of 80 per cent of the shares of the Empresa Eléctrica de Guatemala (EEGSA), 95 per cent of
the shares of the Empresa de Telecomunicaciones de Guatemala, S.A. (TELGUA) and of the
telephone-band operating concession, the sale of two distribution companies of the Instituto Nacional
de Electrificación (INDE), the usufruct of the railway company of Guatemala (FEGUA) and theadministration and operation of the postal services.
Another aspect of fundamental importance is the progress achieved in modernizing the
financial system under the auspices of the Modernization Programme for the National Financial
System.  In this connection, steps have been taken to strengthen the country's financial legislation, so
as to improve the competitiveness of the institutions on the one hand and, on the other, protect the
interests of depositors, as well as safeguarding the liquidity, solvency and stability of the nationalfinancial system as a whole.
Within the framework of the programme to strengthen the national financial system the
following draft laws are now under discussion and aw ait approval by the relevant authorities:  the
Law on Banks and Financial Groups, the Law on Financial Supervision, the Organic Law of the BankPRESS/TPRB/184
Page 11
of Guatemala, the Currency Law, and the Law on Insurance Activities.  The legal reforms proposed
are intended to strengthen the national financial system and ensure greater supervision, by providing a
general legal framework that will bring greater legal certainty and help to make the financial
institutions more efficient, solid, transparent and competitive, on the basis of a preventative approach,
and thereby contributing to the development of the domestic economy and strengthening public trust
in saving and investment.
END