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Guatemala’s Proposed Budget on Spending Path Beyond Inflation

By: Mercedes Azurdia - Sep 5, 2013, 7:53 am

On September 2, Guatemalan congressmen received the proposed general budget for 2014, worth over US$8.93 billion (70.56 billion quetzales) — US$451 million (3.57 billion quetzales) more than the budget approved for 2013. That is a 5.3 percent increase, ahead of 4.0 percent inflation in 2012 and 4.8 percent so far in 2013.

The Minister of Finance, Pavel Centeno, prepared the expenses and income projections, and he claims the rising costs are due to the “good macroeconomic outlook for the country.” According to Centeno, Guatemala’s economy (Gross Domestic Product) is set to grow at a rate of 3.3 percent, and tax revenues will rise to US$6.59 billion (52.1 billion quetzales) to 11.4 percent of economic activity.

This budget’s deficit comes to US$2.31 billion, placing the nation in a vulnerable position and in need of internal and external debt financing, increased foreign aid, or new tax revenues.

The Instituto Centroamericano de Estudios Fiscales (ICEFI) has reservations about the plan. Ricardo Barrientos, a senior economist with the ICEFI, has claimed that although Centeno is right to base the budget on projected economic growth for the country, “the government has not taken into consideration international political issues that may change the projections drastically, like the possible US war with Syria, in which Guatemala would have to be involved for being part of the UN Security Council.”

According to the first analysis made by the ICEFI of the proposed budget, the ministries of Economy and Education, and the Presidential Office for Social Communication — which produces the weekly promotional program of President Otto Pérez Molina — have all benefited with expansions to their own offices. The Education Ministry would use most of the money to pay for a more generous collective labor agreement with its teachers union.

The losers amid the expanded budget proposal, according to the ICEFI, would be the Health and Environment Ministries, as well as infrastructure investment, like roads and bridges across the country — all seeing relative declines in their share of revenue allocation.

ICEFI has also stated that, as presented by the government to the Congress, this proposal does not appear to respond to national reality and is unlikely to receive approval from the 158 congressmen.

Ovidio Monzón, a member of Congress with the Todos party, has confirmed his opposition to the budget project — along with Roberto Villate of the Lider party, Carlos Barreda of Unidad Nacional de la Esperanza, and Álvaro González Ricci of the Creo party. González Ricci has said that the increase “is an obvious government strategy for the whole proposal to be rejected so as to maintain the same budget as this year.”

President Pérez Molina, with a defeatist attitude, has declared that the government has fulfilled its task to present a new budget for 2014, and that “it is up to congressmen to move it forward or to stop it.” The Congress has until November 30 to make the decision.

In any case, if it were to pass, Guatemalans should expect to face higher taxes, a punitive regulatory system (as a backdoor channel of revenue), and more national debt.

Mercedes Azurdia Mercedes Azurdia

Reporter and Spanish editor with the PanAm Post, Azurdia is based in Guatemala City, Guatemala, and also writes for Contrapoder Magazine. Follow her on Twitter @MercedesAzurdia.