{"id":3128,"date":"2017-06-10T12:14:31","date_gmt":"2017-06-10T20:14:31","guid":{"rendered":"http:\/\/www.entremundos.org\/revista\/?p=3128&lang=en"},"modified":"2017-06-10T12:14:31","modified_gmt":"2017-06-10T20:14:31","slug":"why-is-guatemalas-low-social-investment-a-problem","status":"publish","type":"post","link":"https:\/\/www.entremundos.org\/revista\/economy\/guate-in-graphs\/why-is-guatemalas-low-social-investment-a-problem\/?lang=en","title":{"rendered":"Why is Guatemala’s low social investment a problem?"},"content":{"rendered":"

Why is Guatemala\u2019s extremely low spending on public programs and social investment a problem? In short, it increases poverty and hurts competitiveness. Due in large part to lack of social spending, poverty in Guatemala has been increasing, and this has macroeconomic consequences.<\/p>\n

According to the World Bank\u2019s 2014 Guatemala\u2019s Economic DNA<\/a> report, Guatemala\u2019s \u201clagging\u201d GDP shows that its economy has not been keeping up with the global economy or even that of its neighbors.<\/p>\n

Graph 1, called \u201cAnnual GDP growth by percent,\u201d shows data for Emerging markets (Mercados emergentes), Central America, and Guatemala. The second shows GDP per capita in US dollars adjusted with Purchasing Power Parity (PPP). (PPP is a method that converts different currencies to US dollar value based on their local value relative to basic goods, not based on exchange rate.)<\/p>\n

 <\/p>\n

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 <\/p>\n

The UN\u2019s Economic Commission for Latin America and the Caribbean (ECLAC) explains in a 2017 report<\/a> that social investment that \u201cis a crucial tool for increasing competitiveness of private industry and favoring human development. In Central American countries with less developed infrastructure, like Guatemala and Nicaragua, the creation of public capital [public infrastructure like roads and ports] is key to taking advantage of strategic advantages [in resources and location] and to bringing development to different parts of the countries.<\/p>\n

For its part, Guatemala shows one of the lowest levels of investment in the world.\u201d<\/p>\n

(Social spending refers to spending for the future, such as on roads and other infrastructure, while social spending refers to spending for the present, like on teachers\u2019 salaries, welfare programs, or electricity subsidies.)<\/p>\n

This is why the World Bank\u2019s Guatemala\u2019s Economic DNA<\/a> report found that Guatemala\u2019s middling infrastructure rankings are falling, according to the following chart:<\/p>\n

\"\"<\/a><\/p>\n

It reads:<\/p>\n

Quality of infrastructure: Roads,\u00a0Trains,\u00a0Ports, Airports.<\/em><\/p>\n

Social spending is also key to improving worker productivity and economic activity.<\/p>\n

This graphic from ECLAC\u2019s 2017 \u201cConsensus and conflict in Latin American fiscal policy<\/a>\u201d report explains the positive economic impacts of different kinds of social spending (translation below):<\/p>\n

\"\"<\/a><\/p>\n

Translation:<\/p>\n

Examples of the economic impacts of social sectors<\/em><\/p>\n

Social sector \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\/ \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 Examples of economic impact<\/em><\/p>\n

Education<\/em><\/p>\n

The theory of human capital is the principle legal framework through which it is evident that education has economic impact. Education encourages worker productivity, making workers skilled and better suited to the labor market, which has an impact on economic growth.<\/em><\/p>\n

Health<\/em><\/p>\n

Investment in health generates growth in productive capacity, with benefits for individuals and organizations.\u00a0<\/em><\/p>\n

Food security and nutrition<\/em><\/p>\n

Both malnutrition and overweight\/ obesity create personal and social costs, which means that reducing them implies direct savings for national economies in health, education, and, above all, productivity. Action to reduce these also means incentivizing crucial sectors of the economy, like production and distribution of food products.<\/em><\/p>\n

Social protections (i.e., social security, unemployment benefits)<\/em><\/p>\n

Assuring a base level of economic security for people, and mitigating the effects of economic crises or unemployment, facilitates a basic level of consumption in the population, through an injection of resources directly into the market by way of increased demand. Further, it has a direct effect on employment. Among its functions is the regulation of the labor market and the promotion of good-paying jobs.<\/em><\/p>\n

Environmental protection<\/em><\/p>\n

The protection of the environment can have an economic impact through the application of strategies that contribute to reducing contamination. There is also an impetus for the construction sector through the retrofitting\/\u201cgreening\u201d of homes and buildings.<\/em><\/p>\n

Housing and related services<\/em><\/p>\n

The indirect impacts of spending on housing stimulate the construction sector, which accounts for an important part of regional GDP. The public sector creates alliances with the private sector to undertake infrastructure and homebuilding projects.\u00a0<\/em><\/p>\n

Culture and recreation<\/em><\/p>\n

The production of cultural goods and services generally leads to increased private enterprise, through, for example, the salaries paid by private businesses.<\/em><\/p>\n

The importance of \u201csocial protections\u201d like social security and unemployment benefits are shown in the below graphs from the World Bank\u2019s Guatemala\u2019s Economic DNA<\/a> report. They show that consumption accounts for the vast majority of Guatemala\u2019s GDP, meaning that economic crises or sudden unemployment can easily cause GDP to drop if consumers find themselves empty-handed.<\/p>\n

\"\"<\/a><\/p>\n

Spanish translation pending.<\/h6>\n","protected":false},"excerpt":{"rendered":"

Why is Guatemala\u2019s extremely low spending on public programs and social investment a problem? In short, it increases poverty and hurts competitiveness. Due in large part to lack of social spending, poverty in Guatemala has been increasing, and this has macroeconomic consequences. According to the World Bank\u2019s 2014 Guatemala\u2019s Economic DNA report, Guatemala\u2019s \u201clagging\u201d GDP […]<\/p>\n","protected":false},"author":1,"featured_media":3129,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[829],"tags":[836,838,783,833,560,818,839,840,831,841,830,837],"class_list":["post-3128","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-guate-in-graphs","tag-eclac","tag-equality","tag-gdp","tag-government-spending","tag-guatemala-en","tag-inequality","tag-infrastructure","tag-public-capital","tag-public-spending","tag-social-investment","tag-social-spending","tag-world-bank"],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/www.entremundos.org\/revista\/wp-content\/uploads\/2017\/06\/social-spending-8.png?fit=921%2C566&ssl=1","jetpack_shortlink":"https:\/\/wp.me\/p7ljt7-Os","jetpack-related-posts":[{"id":3189,"url":"https:\/\/www.entremundos.org\/revista\/economy\/guate-in-graphs-last-in-the-world-in-public-spending\/?lang=en","url_meta":{"origin":3128,"position":0},"title":"Guate in Graphs: Last in the world in public spending?","author":"EntreMundos","date":"7 agosto, 2017","format":false,"excerpt":"The World Bank rated Guatemala last in the world in public spending and government revenues and near the bottom in public investment in its 2014 report \u201cGuatemala\u2019s Econonic DNA.\u201d The graphs compare revenues, public spending, and social investment as a percent of GDP (a measure of the production of a\u2026","rel":"","context":"En \u00abEconomy\u00bb","block_context":{"text":"Economy","link":"https:\/\/www.entremundos.org\/revista\/category\/economy\/?lang=en"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.entremundos.org\/revista\/wp-content\/uploads\/2017\/08\/publicspendingi.png?fit=921%2C554&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.entremundos.org\/revista\/wp-content\/uploads\/2017\/08\/publicspendingi.png?fit=921%2C554&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/www.entremundos.org\/revista\/wp-content\/uploads\/2017\/08\/publicspendingi.png?fit=921%2C554&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/www.entremundos.org\/revista\/wp-content\/uploads\/2017\/08\/publicspendingi.png?fit=921%2C554&ssl=1&resize=700%2C400 2x"},"classes":[]},{"id":3114,"url":"https:\/\/www.entremundos.org\/revista\/economy\/guate-in-graphs\/guatemalas-public-spending-worst-in-the-world\/?lang=en","url_meta":{"origin":3128,"position":1},"title":"Guatemala’s public spending: Worst in the world?","author":"EntreMundos","date":"10 junio, 2017","format":false,"excerpt":"The World Bank rated Guatemala last in the world in public spending and government revenues and near the bottom in public investment in its 2014 report \u201cGuatemala\u2019s Econonic DNA.\u201d The graphs\u00a0above compare revenues, public spending, and social investment as a percent of GDP (a measure of the production of a\u2026","rel":"","context":"En \u00abGuate in Graphs\u00bb","block_context":{"text":"Guate in Graphs","link":"https:\/\/www.entremundos.org\/revista\/category\/economy\/guate-in-graphs\/?lang=en"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.entremundos.org\/revista\/wp-content\/uploads\/2017\/06\/guatemalaworldbankworst.png?fit=921%2C554&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.entremundos.org\/revista\/wp-content\/uploads\/2017\/06\/guatemalaworldbankworst.png?fit=921%2C554&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/www.entremundos.org\/revista\/wp-content\/uploads\/2017\/06\/guatemalaworldbankworst.png?fit=921%2C554&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/www.entremundos.org\/revista\/wp-content\/uploads\/2017\/06\/guatemalaworldbankworst.png?fit=921%2C554&ssl=1&resize=700%2C400 2x"},"classes":[]},{"id":3167,"url":"https:\/\/www.entremundos.org\/revista\/economy\/guate-in-graphs\/guatemalas-low-government-debt\/?lang=en","url_meta":{"origin":3128,"position":2},"title":"Guatemala’s low government debt","author":"EntreMundos","date":"10 junio, 2017","format":false,"excerpt":"Some countries decide not to fund social programs or social investments so they don\u2019t accumulate too much debt. But Guatemala has one of the lowest debt burdens in the region, so its low social spending and investment can\u2019t be attributed to debt aversion. This chart, from the 2017 report \u201cConsensus\u2026","rel":"","context":"En \u00abGuate in Graphs\u00bb","block_context":{"text":"Guate in Graphs","link":"https:\/\/www.entremundos.org\/revista\/category\/economy\/guate-in-graphs\/?lang=en"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.entremundos.org\/revista\/wp-content\/uploads\/2017\/06\/socialspending25.png?fit=921%2C491&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.entremundos.org\/revista\/wp-content\/uploads\/2017\/06\/socialspending25.png?fit=921%2C491&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/www.entremundos.org\/revista\/wp-content\/uploads\/2017\/06\/socialspending25.png?fit=921%2C491&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/www.entremundos.org\/revista\/wp-content\/uploads\/2017\/06\/socialspending25.png?fit=921%2C491&ssl=1&resize=700%2C400 2x"},"classes":[]},{"id":3147,"url":"https:\/\/www.entremundos.org\/revista\/economy\/guate-in-graphs\/guatemalas-poverty-statistics-compared-to-the-region\/?lang=en","url_meta":{"origin":3128,"position":3},"title":"Guatemala’s poverty statistics compared to the region","author":"EntreMundos","date":"10 junio, 2017","format":false,"excerpt":"Rates of poverty\u00a0and extreme poverty in Guatemala have both been increasing, while the rates of most other countries in the region are decreasing.. The chart below from ECLAC\u2019s 2015 Social Panorama report\u00a0also shows\u00a0that the poor are getting poorer in Guatemala, while in most other countries in the region this is\u2026","rel":"","context":"En \u00abGuate in Graphs\u00bb","block_context":{"text":"Guate in Graphs","link":"https:\/\/www.entremundos.org\/revista\/category\/economy\/guate-in-graphs\/?lang=en"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.entremundos.org\/revista\/wp-content\/uploads\/2017\/06\/socialspending18.png?fit=921%2C620&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.entremundos.org\/revista\/wp-content\/uploads\/2017\/06\/socialspending18.png?fit=921%2C620&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/www.entremundos.org\/revista\/wp-content\/uploads\/2017\/06\/socialspending18.png?fit=921%2C620&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/www.entremundos.org\/revista\/wp-content\/uploads\/2017\/06\/socialspending18.png?fit=921%2C620&ssl=1&resize=700%2C400 2x"},"classes":[]},{"id":13254,"url":"https:\/\/www.entremundos.org\/revista\/uncategorized\/smes-migration-and-the-challenge-of-informality-in-guatemala-an-economy-that-resists-from-below\/?lang=en","url_meta":{"origin":3128,"position":4},"title":"SMEs, Migration, and the Challenge of Informality in Guatemala: An Economy that Resists from Below","author":"EntreMundos","date":"17 septiembre, 2025","format":false,"excerpt":"By Alexander Castillo \/ Translated by Emma Porter\u00a0 This article analyzes the crucial role of Small and Medium Enterprises (SMEs) and migration in the Guatemalan economy. 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