Economic and Social Development: Accord for a Firm and Lasting Peace

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Economic and Social Development: Accord for a Firm and Lasting Peace

Implementations

Economic and Social Development – 1997

The Ministry of Finance submitted a report on fiscal policy commitments on 10 April 1997. Included in the report were plans for a number of tax reforms designed to meet the stipulations in the Agreement on Social and Economic Aspects and the Agrarian Situation, especially to increase tax revenue to 12% of gross domestic product by the year 2000. On 16 April, the Government submitted plans for over 120 million US dollars in public investment for rural development, which surpassed the amount required by the Agreements.1

The Follow-up Commission accepted the Government’s request to delay the process of amending the Urban and Rural Development Council Act. A lack of funding and coordination problems led to delays in initiating the national municipal training program. At 9% of GDP, the tax burden fulfilled and surpassed the level set by the Agreements for 1997 (8.6%), but the rate of public spending was much lower than projected. Some efforts were made to improve tax administration and enforcement, which was to be the main catalyst for increases in tax revenue stipulated in the Agreements. The Government also made strides toward the agricultural and rural development reforms specified by the Agreements, especially with resource allocations and land dispute resolution mechanisms. It also introduced legislation to establish the Land Trust Fund, and Congress approved the bill to change the name of the National Agricultural Development Bank (BANDESA) to the Rural Development Bank (BANRURAL) and restructure it according to the Agreements.2

Some institutional reforms were made in the health care sector, but officials did not fully internalize the reforms, spending fell short of budgeted amounts, and there was little evidence of improvement in public health in 1997.3

The Government gathered resources for the Guatemalan Housing Fund from tax revenues and a loan from the Inter-American Development Bank, which it planned to begin distributing in 1998. The Ministry of Labor and Social Welfare completed draft amendments to the Labor Code, but it did not include all the collective bargaining rights for agricultural workers stipulated by the Agreements.4

  1. “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/51/936), June 30, 1997.
  2. “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/52/757), February 4, 1998.
  3. Ibid.
  4. Ibid.

Economic and Social Development – 1998

Favorable macroeconomic performance in Guatemala facilitated the government’s compliance with the Agreement on Social and Economic Aspects and the Agrarian Situation in 1998. Spending on basic social services increased and the economic and social infrastructure was generally improved, both of which contributed to increases in public investment and job creation. There was a deadlock between planning agencies over the municipal training program, but it was resolved, and municipal development councils built up their capacities. The Ministry of Agriculture began the process of policy reform and transitioning state institutions for agricultural and rural development. The Guatemalan Housing Fund (FOGUAVI) failed to meet its commitment to award at least half of its subsidies to the rural population, and spending on housing was generally below budget. FOGUAVI was also unnecessarily slow in responding to the issue of urban squatter settlements. The Ministry of Health worked on implementing the Integrated Health Care System (SIAS), but geographic coverage had a long way to go and inadequate vaccination coverage failed to contain outbreaks of preventable diseases. The Program of Access to Medicines (PROAM) was operating in compliance with the Agreements. Tax revenue grew, but not enough to meet the target of 10.4% of GDP for the year due to reductions in property taxes and tariffs. The Ministry of Finance revised projections for raising tax revenue to the stipulated 12% of GDP and convinced the Follow-up Commission to allow the target date to be pushed back from 2000 to 2002.4

The Ministry of Labor and Social Security adopted official policies in keeping with the Agreements, and the Labor Code was amended according to the draft submitted in 1997. While additional improvements were made in labor dispute settlement process, workers’ rights to unionize were still impeded, the Ministry of Labor was still overly centralized, legislation had yet to be introduced for vocational and technical training programs, and resources were lacking to properly initiate the School for Labor Mediation and Conciliation.5

In mid-1998 the Follow-up Commission gave priority to fiscal and rural problems. Hurricane Mitch ravaged much of Central America in October 1998, shifting the focus of many of the development efforts to disaster relief and reconstruction.6

  1. “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/53/421), September 28, 1998.
  2. Ibid.
  3. “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/54/526), November 11, 1999.

Economic and Social Development – 1999

The Government undertook to respond appropriately to the damage from Hurricane Mitch without compromising its commitments to the implementation of the Peace Agreements. It succeeded in fulfilling its disaster response plans, but those efforts did in fact hinder progress in the economic and social development components of the Agreements.1

The Fiscal Pact Preparatory Commission was established in March 1998 to help reach the goal of raising tax revenue to 12% of GDP by 2002. The Congress approved the Land Trust Fund Act, and the Ministry of Agriculture, Livestock and Food set priorities and strategies for economic and social development in keeping with the Agreements. Real improvements were made in the equitable distribution of public investment between rural and urban areas. The Presidential Unit for Legal Assistance and Dispute Settlement in Land Matters (CONTIERRA) helped reduce conflicts over agricultural lands, but little progress was made in land registration and legislation had yet to be passed to clarify who has jurisdiction over undeveloped land.2

Public spending on health increased, both in absolute terms and in proportion to total public spending, which in turn improved the health infrastructure and health services coverage. The Ministry of Health and SIAS improved the cost-efficiency of their services and reached out to sectors of the population previously left without access to health care. However, health services still wanted for quality and public health indicators showed the rate of progress was not enough to meet all of the standards set by the Agreements. Infant mortality, for example, was supposed to be brought down to about 25 deaths per 1000 live births by the year 2000, but at the beginning of 1999 it was only down to 45 in 1000. Vaccination coverage was also still insufficient to prevent epidemics.3

Budget allocations for housing development reached the benchmark of 1.5% of annual tax revenue, thus fulfilling the commitment made in the Agreements. However, the services provided by FOGUAVI and FONAPAZ most directly benefited private industry and lacked quality control measures. Housing policies were also more generally failing to meet the purpose, as stipulated by the Agreements, of enabling poor people to have access to affordable housing in safe and sustainable condition.4

The Government did not make good progress with regard to labor laws, union protections and equitable vocational training. Labor union organizers faced harassment, threats and direct violence, even murder. The alleged perpetrators were either unknown or claimed to represent local citizens.5

  1. Ibid.
  2. Ibid.
  3. Ibid.
  4. Ibid.
  5. Ibid.

Economic and Social Development – 2000

Following the rescheduling of the taxation target from 2000 to 2002, the Follow-up Commission spearheaded a consultative process involving many sectors of society, which culminated in the signing of the Fiscal Pact for a Future with Peace and Development. The Pact clarified the long-term plans the Government would need to follow in order to enact a fiscal policy in keeping with the Peace Agreements. A similar consultative process led by the Follow-up Commission established the Political Agreement for Funding Peace, Development and Democracy in Guatemala. This agreement added specific measures for tax reform and paved the way for further reform policies negotiated between the executive and legislative branches.5

The Government continued to falter in its implementation of policies related to rural development. No comprehensive rural development strategy was yet proposed, definitions of agrarian and environmental jurisdictions had not been set, the land registry issue was unresolved, and the land rights of indigenous communities were not codified. The Government did make some steps in the right direction with its environmental policies, but the agricultural policy it set for 2000-2004 lacked guarantees for multiculturalism, procedures to ensure indigenous peoples would be involved in decisions about their own development, and affirmative action programs for women and rural youth. By the end of 2000, BANRURAL increased its loan portfolio with a focus on areas most affected by the conflict.7

The Government did not invest nearly as much time and energy as was needed to address the country’s labor problems. The main improvement was the increase in the minimum wage. The main corresponding problem was the Ministry of Labor had neither the financial resources nor the institutional capacity to ensure that historically exploited workers—indigenous persons, women, children and rural agricultural workers in general—would be treated fairly and paid their due wages.8

The new governmental authorities were quite slow in reviewing all the social development programs and hindered progress in so doing. The approved budget for public investment was cut by 20% and spending even fell short of budgeted amounts, which especially affected spending in the country’s poorest areas. The spending reductions did not adversely affect public health programs. The new National Health Plan 2000-2004 set budgeted spending levels consistent with the Agreements, included measures to decentralize and improve coordination, and prioritized extending access to health care to groups previously unreached by the services, especially indigenous women and migrant workers.9

While adequate amounts were budgeted for housing development programs, FOGUAVI was deactivated and spending ceased, leading to a spike in unemployment among construction workers and growing discontent among the would-be beneficiaries of new housing.10

The network of local development councils was not living up to its intended purpose of engendering broad social participation in municipal and community projects. Despite reform measures enacted by the Executive Branch designed to foster local participation in the selection of leaders, gubernatorial candidates put forward by non-governmental members of development councils were largely sidelined.11

  1. “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/55/175), July 26, 2000.
  2. “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/55/175), July 26, 2000; “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/55/973), June 1, 2001.
  3. “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/55/175), July 26, 2000.
  4. Ibid.
  5. Ibid.
  6. Ibid.

Economic and Social Development – 2001

The implementation of the peace agreements lagged in 2001 in general.8

The budget of the SIAS shrunk by 23% compared to the previous year, when it should have grown in order to stay on target for the expansion stipulated by the Agreements. Health care coverage was not yet extended to include migrant workers. The National Health Council was established in March 2001 to improve coordination in the provision of health services. In keeping with the Healthy Schools Plan, meal programs were initiated in 16,000 schools, but no action had yet been taken to combat malnutrition among children under the age of five. Likewise, vaccination coverage in children was still insufficient, and the water supply was unreliable in rural areas. The Ministry of Health and Social Welfare launched a program to provide reproductive health services across the country.9

A discussion set up by the Vice-Ministry led to an agreement between the Government and civil society leaders on a national housing and human settlements policy, which was approved in August 2001. It set clear priorities on resolving the housing shortage, especially among the country’s poorest people. The Government pledged to reactivate FOGUAVI, but it did not yet create a budget to do so.10

The drop in international prices for some of Guatemala’s main exports—most notably coffee—had a dramatic negative impact on local economic enterprise, especially for small and medium-sized farms, which were already struggling to compete against the large agricultural conglomerates in Guatemala. Income inequality continued on unmitigated, as the Ministry of Labor was still unable to enforce minimum wage laws. On the positive side, it did become easier to register trade unions and some consultation meetings produced draft legislation to bring the country’s Labor Code into compliance with International Labor Organization standards.11

No significant progress was made toward comprehensive rural development. The rural populations continued to suffer from poverty and inequitable access to state resources. Reforms to improve land registry and clarify agrarian and environmental jurisdiction were further delayed. Displaced persons especially suffered from social exclusion and denied access to land. Whatever projects were implemented were piecemeal and short-sighted.12 The Land Trust Fund did not receive all of its budgeted funds.13

  1. “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/55/1003), July 10, 2002.
  2. “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/55/973), June 1, 2001.
  3. Ibid; “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/55/1003), July 10, 2002.
  4. “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/55/973), June 1, 2001.
  5. Ibid.
  6. Ibid; “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/55/1003), July 10, 2002.

Economic and Social Development – 2002

A new program began to prevent childhood diseases. Vaccination coverage against measles and polio increased, and the latter was effectively eradicated.1

The budget approved for the Land Trust Fund was much lower than it requested, even though there was a high demand for credit. The shortage of loan resources caused tensions and confrontations. In April 2002, members of the National Council for Displaced Guatemalans occupied several offices of the Land Trust Fund to demand access to land and loans. The Follow-up Commission intervened and the Government made moves to increase the Land Trust Fund’s budget.2

The issue of agrarian and environmental jurisdiction was finally addressed with the passage of an agrarian reform bill in Congress, but it was not yet implemented and some ambiguity about idle land remained. A Secretariat of Agrarian Affairs was also established. A land registry bill, endorsed by the Follow-up Commission, was also submitted and debated in Congress, but President Portillo withdrew it for revision. The lack of a coherent land registry system was a major hindrance to progress in rural development.11

The BANRURAL raised the credit and financial services offered substantially, but most of the poor in the rural areas could not get loans because they lacked titles to land.12

The recent moves to eliminate and prevent child labor were not enforced.13 The Social Security Institute did not as yet extend services to indigenous people.14

The Government failed to increase tax revenues to 12% of GDP, even though the deadline was extended from 2000 to 2002. The actual rate for 2002 was 10.6% of GDP. While the Government is held responsible for this failure to implement a component of the Peace Agreements, the private sector is also partly to blame for organizing resistance to tax increases.15

Congress passed the Urban and Rural Development Council Act with Legislative Decree No. 11-2002, and the General Decentralization Act with Decree No. 12-2002.16

  1. “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/55/1003), July 10, 2002.
  2. Ibid.
  3. Ibid; “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/58/267), August 11, 2003.
  4. “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/55/1003), July 10, 2002.
  5. Ibid.
  6. Ibid.
  7. “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/58/267), August 11, 2003.
  8. “Information Received from Governments: Guatemala,” Permanent Forum on Indigenous Issues, United Nations Economic and Social Council, (E/C.19/2010/12/Add.8), March 3, 2010.

Economic and Social Development – 2003

A continuing decline in the price of coffee in the global market exacerbated the difficulty the agricultural sector in Guatemala was already experiencing since 2001. The Government agreed to fund a “coffee emergency” plan, which was designed to assist rural peasants by encouraging crop diversification and helping unemployed Guatemalans in rural areas acquire land.1

Overall, the 2003 budget improved over the previous year’s budget, but there were some significant shortfalls. The Presidential Office for Legal Assistance and Dispute Settlement in Land Matters was defunded in the 2003 budget. The Government provided some temporary provisions, but the office staff and coverage area were severely cut. Budget allocations for the Land Trust Fund similarly fell below the amount set by the Agreements. The Ministry of Health also suffered cutbacks, resulting in reductions in basic preventive services, especially in rural and indigenous areas.2

Some core issues from the armed conflict were left unresolved due to the Government’s incomplete implementation of the Peace Agreements. In particular, public services were deficient, rural development efforts did not significantly increase opportunities for rural communities, and many land conflicts were never resolved. Indicators of economic development showed no improvement in income disparity through the peace process, and an actual increase in extreme poverty toward the end of the implementation phase. Much of the failure to improve economic and social development resulted from lower than expected tax revenues and subsequent spending cuts.12

  1. “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/58/267), August 11, 2003.
  2. Ibid.
  3. “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/59/307), August 30, 2004.

Economic and Social Development – 2004

There was a sharp rise in violent land evictions, exacerbating humanitarian problems for rural communities.13

In June, the Mayan Farmers’ Front organized a 48-hour strike to protest the forced eviction of landless rural workers from idle lands. As a result, President Berger announced a suspension of evictions and other concessions.14

The commitments regarding increasing tax revenue, expanding and improving public services, promoting development in rural areas especially, rejuvenating the public health system, and resolving land disputes were not fulfilled by the rescheduled deadline of 31 December 2004.

  1. “United Nations Verification Mission in Guatemala: Report of the Secretary-General,” United Nations General Assembly (A/59/746), March 18, 2005.
  2. “Guatemala,” Keesing’s Record of World Events (Volume 50), June 2004, 46052.

Economic and Social Development – 2005

No developments observed this year.

Economic and Social Development – 2006

After years of attempted economic development, 57% of the population still lived in poverty, with 21% in extremely poor conditions. Guatemala had one of the worst rates of wealth inequality in the world.17 In 2006, President Berger embarked on a campaign to evict squatters from farmland they seized during the previous administration. One group of peasant farmers rose up and attempted to re-capture an estate by force after the owners fired hundreds of workers. At least five people were killed in the clash.18

  1. “Report of the High Commissioner for Human Rights on the Situation of Human Rights in Guatemala,” United Nations Economic and Social Council (E/CN.4/2006/10/Add.1), February 1, 2006.
  2. “Five Killed in Guatemala Clash over Land,” The Gazette (Montreal), July 10, 2006, A16.