Since the current Government negotiated an end to a three-decade civil war in 1996, an opportunity has opened to strengthen democratic institutions. How has the proposition of Constitutional Reform provided structural changes in the Executive, Legislative and Judicial branches of the Guatemalan Government?
As you know, after 36 years of internal conflict and civil war, the Guatemalan government signed a peace agreement with the Marxist rebel forces. Those four different rebels groups are now part of the Guatemalan society. They have organized two or three political parties and are working within the framework of the constitution.
The peace accords incorporate many of the demands from the former quarrel groups that are now part of a national agenda, like Land distribution, Respect of the indigenous rights, Fiscal reforms, Modernization of the country, etc. All that is incorporated in the peace accords which have been implemented during the last years.
We also think that the international community played an important role, not only in assisting us in the dialogue that achieved these peace accords, but also in the implementation of the peace accords. The European Union for example is the largest donator we have through the government and through NGO's programs all over the country. We are following the same trend we have seen in El Salvador, Nicaragua or Honduras and in the other Central America countries.
We are on the right path. All the military dictatorships are a part of the past and there is a recognition of the diversity and plurality. As you may know, 60% of the habitants are indigenous. We have 22 different ethnic groups and 22 different languages or dialects. More and more, recognition of the indigenous rights are coming along to respect their traditions, for them to share a largest part of the Guatemalan development. We have to start with something: education. The current government is investing a huge amount of money -in the new budget that just has been presented to the Congress- for reinforcing education. That is the base for growth and stability.
One problem we had last year was when the government proposed a constitutional reform, as stipulated in the peace accords, through a national referendum, where the Minister of Defence would not to be an active military officer any more but a civilian. The president always has had his presidential Etat-Major composed by militaries, which is something they also wanted to change. In the constitution reform it was called that it should be eliminated. Finally, the constitutional reform didn't pass; it wasn't approved by the referendum. What is being done now is to implement the peace accords without touching the constitution but via other procedures, through regular legislation. Since the Constitution was not changed, we are limited in modifying the electoral law. Some of the principles that are in the Constitution cannot be touched. We have 22 provinces and we wanted to subdivide each of these provinces into several electoral districts. Instead of that, we have now a system of lists, ten names on a list for one electoral district -which is one of the 22 provinces-. It would be more democratic to have small electoral districts with only two names on the ballot. But we were not able to change that either. Things of that kind to provide larger sense of democracy, larger participation from the population, larger control of the population over elected officials, that was the target of the Constitution reform, but that was not achieved.
In any case, the implementation of the Peace Accords is going on and what was involved in the constitution reform is tried to be done through others avenues, not as broad as we wanted but approaching the final goal.
Until 1999, Guatemala had been in a period of transition between war and peace. How is the Government's policy accelerating the economic and social development?
During the years of the conflict, the largest part of our budget was allocated by the Ministry of Defence. Since the Peace Accords were signed, and during the last four years, the Ministry of Defence has been reducing its shares of the National Public budget for the benefit of the Ministry of Health and the Ministry of Education. Of course the militaries complain about it because they don't have the same resources they used to have but they also understand that in a period of Peace, they don't need the same amount of money. We have been able to use most of our resources in the national budget towards Education and towards our services. In fact, the road system in Guatemala was completely abandoned for many years. An enormous effort has been made to re-establish that network, building new roads. It's going very well. I would say "first class roads" towards Guatemala.
Several funds have been also established like the Land Fund, the Indigenous Fund, the Fund for repatriate people who had left the country and the General Development Fund dedicated to the building of small projects like providing potable water, bridges and roads. In such a mountainous country, indigenous groups needed roads. It has been very difficult for these people to extract their products, to conserve and commercialise them. With new roads, it will be easier for them to produce, to grow and to send theirs products to the market. The change also has been reflected in the import of cars. There has been a boom in importation of all types of vehicles. Guatemala's exports are also growing a lot, especially in non-traditional products. All those things are the result of the Peace Accords and of the international investment in Guatemala, mainly Mexican. A lot of Mexican corporations have come to Guatemala and merged with local companies. Some others invested a lot of money in the country, creating new jobs. Koreans for example moved many of their factories to Central America, producing in Guatemala. It has created an enormous amount of jobs, even if some people criticize because they say Koreans were only taken advantage of a cheap labour. On the other hand, there are teaching people how to work through a process in a factory and then Guatemala will move ahead, like Costa Rica has already done, from clothing, manufacturing into other technical works like television and computers. This has been a very educational process to have this kind of investments coming from Korea, Taiwan and Hong-Kong.
The power industry in Guatemala is also very strong. Most of it is produced in Guatemala. It is benefiting the cotton growers and manufactures within the country.
Of course we have problems. After the civil war, you have factions that have been bearing weapons and arms. For 20 years, they have been fighting against each other. So it is not easy to just abandon that. They don't know how to work, how to do other things. Therefore, we still have some level, but not a high level, of bandits, robberies, people who need money and cannot make money through normal works in Guatemala. Most of the weapons were given up and they were paid for that. But I do believe that most of these weapons were never given up but sold or used by these people. These problems are the result of the civil war we had in Guatemala.
At the same time we have to strengthen the government and the Police. Few years ago, just before the signature of the Peace Accords, most of the Police force was in the hands of the army, which is why we have been training a new national civilian police force that has nothing to do with the military. The Europeans, especially Spain, have been sponsoring the training of this National Police Force. You have the presence of 200 Spanish officers in Guatemala.
The traditional branch was also was very dependent on the Executive. But now there are training programs for judges and officials to investigate crimes as we didn't have investigators. The impunity level in Guatemala was very high. This institutional building process is also going very well.
Guatemala's economic growth and poverty alleviation efforts depends on the Administration's ability to continue implementing crucial macroeconomic reforms and putting in place the programs to achieve the various targets of the Peace Accords. What are the difficulties faced by the country in order to succeed in that way?
On macroeconomic level, the major reform is in taxation. The Peace accords called for 12% by the year 2001. We are actually at 8,5 or 9%. The previous Government tried in two occasions to pass this and the new Government, which was inaugurated this January (2000), has also been charged with this. There is a commission in charge of this where you have representation of the Private sector and all different sectors. They have agreed for 12% but now the opinion is parted. Some speak about taxing income, or property, and the other ones say let us tax consumption, meaning that people who consume should pay up to 10% for basic consumer things. The Government who said that 12% was not enough and proposed 15% is still dealing with it. There is a meeting in Guatemala scheduled with the consultation groups. These consultation groups are the World Bank, the IMF, the European Union, and all the countries that have been assisting Guatemala in the implementation of the Peace Accords.
Guatemala hopes that by November it will present the results of this fiscal reform and new taxes, but it is still very difficult. Yesterday, the president called for the postponement of this meeting with the consultation groups. So it's more likely that it's not going to happen this year but probably at the beginning of next year. It all depends on how the new fiscal reforms will come along.
The problem is the crisis we have in congress and legislature right now so that will probably delay the whole process. But the debate is moving along in a very democratic way.
Could you give us more details on this crisis in the Congress?
It seems that 2 months ago, in the context of this tax reform, the Congress raised taxes on consumer products (non alcoholic beverages, beers and wines and other imports of that kind) up to 20%. When this was published in the national "Diario Oficial", the taxes were 10% lower, so there was a big scandal where people started asking themselves who decided to make these changes.
There is a legislative procedure which, after a
law has been approved and after 2/3 of Members of
Congress have signed this approval, makes things
changed, which is why there was a "fondo de
revision" at the end. Eventually, Congress
ended up by reducing the taxes. |
Now the opposition claimed that this was actually changed without the authorization of the congress and that it wasn't democratic, so all the deputies who signed this revision are under investigation. Now the Supreme Court must decide if they are going to be suspended as legislators, whilst a full investigation is completed by the judge. This implies that if so many legislators by the official party are involved in this case, are under investigation, and are suspended as deputies, then the party in government will loose its majority. They have many legislators who are ministers, ambassadors, and secretaries in the executive branch, which will force them back to congress to force a majority and then the executive branch will be left without its ministers or secretaries etc. That would create a government crisis in the future.
But of course the party has placed legal actions against some of the members of the Supreme Court, so basically it is a big mess on the political side.
But then on the economic side, Guatemala has been very steady on the value of the _______ it's the 7.75 for the last 2 to 3 years. So despite the ups and downs in political life, on the economic side Guatemala has been very stable.
Investment is still flowing and we are still taking advantage of this proximity with the US and Mexico, making it easy to export goods to these countries and to Europe.
We have a huge variety in terms of fruits and vegetables, making our exports in this sector good.
What Guatemala also needed to do was to reform its intellectual property rights. The US wanted the government to be involved in this by criminalizing the misuse of IPR's, which the latter didn't want to get involved in at the beginning. But finally after a lot of debate with the US, the government decided to pass a new IPR law covering all the edges that were demanded. This will enable Guatemala to be a beneficiary of the CBI (Caribbean Basin Initiative), which has a general preference system. If Guatemala hadn't passed this law, Guatemala would have automatically been excluded from any of these benefits this year.
In order to strengthen the economy, the Government is trying to implement a program of privatisation. Can you give us your views on this issue?
If you compare Guatemala with other developing countries, Guatemala had very few governmentally owned companies. We have an old railroad system, electricity, telephones, water, which needs to be privatised.
What has been done is to privatise the whole Telecom sector. The government has only kept one unit in order to subsidise some villages communities that have no resources to pay. We have more or less 5 telecom companies operating in Guatemala right now.
The last one, Telefonica, has been a big splash bringing up billions and billions of dollars to Guatemala.
You have Bell South, France Telecom through Telmex, etc.
The electricity distribution has been privatised as well. Many hydro projects have been developed, keeping up in mind the many hills and rivers Guatemala hides. One of these is a project led by Enron which supplies electricity through floating barges on the pacific.
We have a very old railroad with narrow gauges, which has been given as a 3 year long lease to an American company, which they are trying to develop. The railroad system was established in Guatemala in 1875, and it hasn't really been modernized since, so we will have to see in what direction this project will move forward.
The Guatemalan Government owned a Mortgage bank; the army has its own financial institution, but never owned any manufacturing companies or insurance companies, which is why it wasn't very difficult to privatise a lot of the left over companies.
As part of a broad economic liberalization program, the Government has designed an ambitious public sector modernization program. This modernization process will open Guatemala to the global marketplace.
Yes, the non-traditional products are the ones that are more in favour right now. Coffee and sugar are still our major export products and have been for years. More and more, the non-traditional products like fruits and vegetables, spices, or more specifically shrimps for Europe or Tuna fish, have been more recently exploited and exported. A Spanish consortium has huge ships in Guatemalan waters and has some concessions through it, shipping all over, using Guatemalan ports for shipping.
In shrimps, Guatemala is being qualified from the EU to be on the Number One list. So we don't have to be checked out by the European Sanitary officers for each shipment, because all of our shipments have been pre-qualified already.
Bananas of course are very important for Guatemala. We have two international corporations producing and exporting from Guatemala, which is very different from Ecuador. Most of the production and exportation in Ecuador is done by the Ecuadorians themselves who owned small companies. But in Guatemala, there are two main corporations which own and develop this activity.
Traditionally, they had been only working on the Atlantic and Caribbean cost, but now they are developing new tracks of land and production on the Pacific Coast , which has brought a lot of money into the country.
Of course we have some problems with the EU, because they only allow a certain amount of non-ACP bananas. We have the support of Germany, who would like to buy cheap bananas from Guatemala but they are forced to buy smaller and higher priced bananas from former colonies in Africa or the Antilles. This issue is at the WTO right now, so we hope that negotiations in the next years will allow us to export more of our bananas this way.
Guatemala also exports lots of Berries and Beans. All the ecological products are also a growing market for us like Rum, which is exported to the states and Europe as well as the hydro biological products, basically shrimps and fish.
Tourism in Guatemala has also been growing rapidly since the peace accords. Now you can just roam freely without being caught in the middle of crossfire between the military and the guerrillas .
We don't have beaches. They are all black volcanic sand because of the 22 volcanoes Guatemala has in this range, and the ocean is very rough because it is open but nevetherless it's very pleasurable.
What is being developed is the hotel infrastructure within the country, not so much in Guatemala City as there are enough of them.
Guatemala is a very attractive country with incredible mountains and architecture and an incredible canyon which overlooks the ocean. The Ruta Maya, which is a combined route between Mexico, Guatemala, and Honduras, is being developed as well, so that tourists can combine the three countries in one holiday.
The World Bank's assistance is focused on poverty alleviation and human resource developments. The World Bank has a portfolio of eleven operations under implementation representing US$ 355,1 million in commitments. How effective have these contributions been in the bank investments in Financial, Judicial and Social fields?
Their main objectives have been to restructure the financial sector in Guatemala, which have ended up in very good results. The Minister of Finance, who used to be in charge of collecting taxes, dealing with the budget and spending the money, now only deals with creating the budget. So with the help of the WB and other institutions we have developed an office called la Superentendencia de Administracion Prebutaria, which is an independent body in charge of collecting taxes and customs. The result of this internal tax reform system has been felt immediately.
Then the WB set up a program to help in the judicial system, by training judges and changing the Supreme Court, as well as making it completely independent from the executive branch.
They have also been very good on the social field side, where they have been sponsoring funds for indigenous issues in terms of poverty alleviation, and in terms of education especially for women.
The Government will face considerable challenges in making progress on increasing the tax ratio towards its revised peace target of 12 percent by the year 2002. A first step to the GATT full implementation by the year 2005? Can you tell us what your expectations and challenges are in representing Guatemala within the European Union?
The EU has been the largest donor for the peace accords in Guatemala, which is why the follow up is extremely important as that they want to be sure that their money has been well spent, that their programs are well developed, and that their goals are being attained, etc.
But more and more, the EU is interested in dealing with Central America as a group. The San Jose meetings were established 6 years ago. We have already done 16 of them. This is where we established the framework of our relationship. More and more we are seeing a two-way relationship. It is no longer EU which gives and Central America which takes. They are helping us very much on the unification front and in terms of trade.
In terms of the GATT, we are still working on it, as we want to do it as a region and not separate countries. Guatemala, El Salvador, and Honduras have just signed a free trade agreement with Mexico for starters. |
