Guatemala is the most populated countries in Central America with one of the highest demographic growth rates. It is classified as a lower middle-income country. It has the largest proportion of indigenous populations in Central America (over 40%) and 52% of the total population is younger than 20 years of age. The rate of child chronic malnutrition is the highest in Central America at 46% which can go as high as 80% in certain municipalities. Guatemala is affected by alarming rates of insecurity and violence and an increasing penetration of drug-trafficking cartels as the country is a major transhipment point for US and EU-bound cocaine. Public finance management is a major issue: Guatemala has the lowest tax revenue to GDP ratio (10.4%) in Latin America. The private sector is an extremely powerful lobby in Guatemala.
Thanks to prudent macroeconomic management, Guatemala has been one of the strongest economic performers in Latin America in recent years. Even so, it is one of the few countries in the region where poverty has increased in recent years.
The concurrence of the EU and the Member States’ priorities for future cooperation with Guatemala will allow the use of Team Europe initiatives to lead the political dialogue focused on reducing inequalities that affect broad sectors of the population, specifically youth, women, and indigenous peoples.
Guatemala has experienced some formal and structural improvements in its level of development. However, this macroeconomic growth has not translated into improving the quality of life for the majority of its population, nor into the reduction of multi-dimensional poverty and malnutrition rates that mainly affect the indigenous part of its population.
Taking into account the above context, the EU proposes three priority areas for Guatemala to be supported financially by the Multiannual Indicative Programme (MIP):
We promote Guatemala’s transformation towards a society and economy anchored in green values such as the fight against climate change as well as the protection of the environment and the preservation of biodiversity. These respond to a shared interest between the EU and Guatemala and they are areas where the EU can contribute with experience, knowledge, and technology.
Sustainable and inclusive growth
We aim at boosting the economy by reducing unemployment and providing alternatives to irregular migration, especially among the young. The most recent population census shows a substantial increase in the proportion of men and women of productive work age representing a potential “demographic dividend”, provided that this potential is tapped into the global transition towards a low carbon economy with “green jobs” and the accelerating digitalization it provides new opportunities for innovation and employment creation. The EU can help Guatemala take advantage of the global transformation of modern economies.
Good Governance and Human Development
Institutional weakness in Guatemala is a key factor explaining many of the challenges affecting the country and its population. Any credible process toward structural reforms needs strong institutions, effective regulations and procedures, and an efficient civil service ready to implement E-government solutions through the digitalization of public administration. Moreover, poverty and other root causes of high rates of malnutrition in the country need to be addressed. This will come at a significant cost, which will require Guatemala to mobilize domestic resources and prioritize public investment in these areas. EU support can complement these efforts in line with the 2030 Agenda’s commitment to helping the most vulnerable.
The Multiannual Indicative Programme(MIP) for Guatemala for 2021-2024 amounts to €141 million.
Priority area 1: ‘Green Deal’ supports the development of an inclusive, sustainable and resilient small-scale agriculture, better linked to value-chains, fostering growth, improving healthy food environments, and reducing malnutrition rates, specifically in rural areas.
Priority area 2: ‘Sustainable and inclusive growth’ advances an open economic structure, inclusive and competitive, and promotes a sound investment climate. Guatemala has a conducive business environment that supports entrepreneurship and the competitiveness of MSMEs, particularly in the green, blue and circular economies for the generation of decent employment opportunities.
Priority area 3: ‘Good Governance and Human Development promotes strong, accountable, and transparent national, regional, and local administrations that can efficiently design and implement sustainability-oriented national policies and mobilize sufficient national resources to finance them while ensuring universal access to quality social services, combined with targeted access to an enhanced social safety net.
Measures in favour of civil society will be taken aiming to strengthen civil society organisations, especially at the local level, which remains one of the EU's priorities in its relations with Guatemala.
The EU will continue to actively involve civil society actors in the different phases of its bilateral cooperation and will ensure a close link between the dialogues established with civil society and financial assistance.
This support will be provided to improve access to information and the participation of citizens and civil society organisations aiming at supporting the development of a lively, active civil society.
Multiannual action plan
The multiannual financing decision for the implementation of the multiannual action plan in favour of Guatemala for 2021-2022 – part I includes the following actions:
- Effective domestic revenue mobilization for inclusive growth
- Support for Decent Employment in Guatemala
The maximum Union contribution for the implementation of the action plan for 2021-2022 is set at €25 million.