Economics in Guatemala
If you’re anything like myself, perhaps you’ve found yourself in an international studies class wishing to research a culture first hand. Being blessed to travel with Global U, we take those opportunities to get to know the economic, cultural, and spiritual climate of the communities around us. I wanted to share what I’ve learned from Diego, one of out Global U students, about life and economics of his home country of Guatemala.
Located between Mexico and Honduras, Guatemala is rich with diverse culture. Within 42,000 square miles there are 288 volcanos, two of which are active. Just for reference, the United States is 3.8 million square miles! There are also deep historic roots. Tikal, located in Peten, Guatemala, is a ruin from the Mayan civilization and in ancient history was an integral city of the Western Hemisphere.
Diego explained that Guatemala is known as the “country of eternal spring” because it consistently “remains radiant in its fauna.” He also notes that people “are very cordial to everyone.”
Work is diverse, and a number of work opportunities differ by geography. For example, in areas with a lot of tourism, many people work as artisans or making hand crafts such as jewelry, bags, dishes, or textiles. Call centers offer high paying jobs opportunities in the local economy, specifically for English speakers.
The village landscape can look quite different than life in the cities. Infrastructure such as roads, water pipes, drains, electricity, and education are easily accessible in the cities. However, in a number of rural communities, education is limited and most children stop studying at the age of 12 because they don’t have the necessary resources. On the city outskirts, the “maquila” sector is quite large. A number of Korean or Chinese companies have built factories to outsource labor intensive products.
Agriculture is a large industry as well, especially for those who live in more rural or remote communities. The tropical climate allows for long growing seasons and tropical fruits to be produced. Corn, sugar, bananas, cardamom, beans, bananas, and avocados are among the most common crops. Guatemala is also famous for exporting coffee thats grown abundantly in the mountains. Antigua, the city Diego is from, is known for having plenty of high quality coffee shops.
Coffee, sugar cane, and clothing are some of the goods with the highest export rates. These are often sent to the United States, the Euro-zone (Germany, Spain, and France among others), Korea, and Australia.
Diego believes the best economic opportunities for Guatemala lie in “outsourcing technology services for developed countries such as the United States or the European Union.” Labor prices and currency conversion are advantageous the United States, Canada, and Europe. Real estate and rentals have high margins which hold lots of promising opportunity as well. If you’re looking to start a business in the area, profits from agricultural products are 20-30% gross margin while the profits from services have a gross margin profit of 50-70%.
Like many Central American countries that have high rates of tourism, COVID-19 has brought economic pain to the area. During the pandemic the entire tourism and restaurant sector had to be closed. Diego highlights that this sector “lost more than 70% of its jobs due to the pandemic.” The only economic sector to increase its demand within the international health crisis was the call centers.
Not only was there a demand side issue where jobs were lost from sales, but supply chains also broke. Some villages such as Alta Verapaz “suffered by not having any resources.”
In response to COVID, the government implemented a bond for all families who had taken a financial hit. However, because the assistance was dispersed in the form of a bond, a bank account is required to receive the stipend. Unfortunately, there is a large percentage of the population that does not have a bank account and was therefore not able to receive assistance.
This blog can't take you to Guatemala, but I hope you've learned a thing or two. Stay tuned for more economic updates on the countries we have visited!