GUATEMALA merges with globalisation Introduction - Economy - Government program - Commerce & Trade - Tourism Telecommunications - Modernization - Public Sector - Privatization - Central America ... Integration Infrastructure - Reforms - Peace Process INFRASTRUCTURE Introduction Since 1996 the new government of Guatemala showed its intention to foster the conditions that should allow the country to increase the rate of economic growth and to reduce poverty. To support these objectives the government started, among other things, an ambitious plan to modernize the infrastructure. The program was oriented at reforming the legal framework of the different sectors, increasing private investment and strengthening regulatory mechanism, in order to guarantee the fulfillment of technical standards and to foster competition in services. This publication analyzes the reform process in infrastructure in Guatemala since 1996. First, government plans and the Peace Agreements commitments in infrastructure are reviewed. Then, it describes the legal changes that have been made, as well as the opening up of the sector to private participation and the changes in the execution mechanisms in the public administration. Finally, the document presents conclusions and recommendations. Although the concept of infrastructure includes more sectors of the economy, this document limits itself to electricity, communications (telecommunications and postal services) and transport (highways, railroads, ports and airports). This is the first of a series of four documents dealing with the topic of infrastructure, all published under the title ´Infrastructure for the Third Millennium´. This document analyzes broadly the strategy adopted in the nineties to reform the infrastructure sector. The other three documents revise in more detail the progress achieved in electricity, communications and transport. To convert quetzals into US dollars the following table is presented. Year Exchange Rate Q / US$ 1996 6.06 1997 6.06 1998 6.40 Source: CIEN 1. Importance of infrastructure in economic development The role of infrastructure in society is to provide the basic services that allow citizens and companies to develop their activities. Basic services include the supply of electricity and telecommunications, the provision of drinking water and sewerage, transport services such as urban, freight, railways and air transport. Both quantity and quality of the infrastructure define the economic and social development of a country, and in general terms, the availability of efficient infrastructure is related to economic development. The World Bank has shown that an expansion in infrastructure and a rise in economic output go hand in hand: an increase of 1% in the stock of infrastructure is associated with a 1% increase in Gross Domestic Product (GDP). Nobody knows whether the causal relationship goes from infrastructure to development of from development to infrastructure. Probably the influence is reciprocal: good quality infrastructure fosters the conditions for a country to grow, and, the other way around, a developed country has the financial capability and the resources to invest in an adequate infrastructure. However, it is important to emphasize that infrastructure is not the only factor that affects the development of a country. There are other features of the economy, like the level of education of the population, efficient markets, natural resources, dynamic institutions, etc. that will influence economic progress. Anyway, infrastructure is a first-order factor for development, and no one doubts that the lack of it is an obstacle for development. 2. Infrastructure of Guatemala in 1996 For decades, infrastructure in Guatemala has been in poor shape. Tables no. 1 and no. 2 show characteristics of some of Guatemala´ s infrastructure in 1996, compared to some other countries. In the case of electricity for example, the situation in Guatemala was such that the average electricity consumption was only 342 kWh per capita (which is equivalent to having two light bulbs of 100 watts turned on for approximately five hours a day). Besides, only one out of two households had access to electricity services. The number of telephone lines per 1000 inhabitants in Guatemala was below the average of the region. Because of its poor state, 66% of the railway network was practically unused, and operations were abandoned at the beginning of the nineties. Until very recently Guatemala did not have railway services. The road system was characterized in the nineties by a continual deterioration, due to the virtual abandonment of government maintenance and the fast growth of vehicular traffic. In most of the cases, Guatemala was below the average of the examined countries, which implied that in terms of quantity and quality, infrastructure became a real obstacle for the country's economical and social development. Electricity and telecommunications infrastructure in Guatemala, Costa Rica, El Salvador, Chile, Argentina and Bolivia in 1996* World Development Report: Infrastructure for Development, World Bank, 1994   Gross Domestic Product (GDP) Electricity Telecommunications   (US$ per capita, 1996) Electricity Consumption (kWh/ inhabitant, 1996) System Losses (% of production, 1995) Phone lines (per 1,000 persons (1996) Waiting list (1996) Guatemala 1,470 342 13 31 100,000 Costa Rica 2,640 1295 8 155 77,900 El Salvador 1,700 527 13 56 200,000 Chile 4,860 1949 10 156 72,500 Argentina 8,380 1714 18 174 - Bolivia 830 376 12 47 50,100 Sources: World Bank, World Development Report: Infrastructure for Development, 1994; World Bank, World Development Indicators, 1998; IAE, Energy Statistics, 1996; CIEN, Bases para Desarrollar la Infraestructura Nacional, 1995. * Costa Rica and El Salvador were chosen for being similar countries to Guatemala in Central America; Chile, Argentina and Bolivia were included because of their experience in infrastructure modernization. Previous Read on Next © World INvestment NEws, 2001. This is the electronic edition of the special country report on Guatemala published in Forbes Global Magazine. June 11th, 2001 Issue. Developed by AgenciaE.Tv