Non-Traditional Exports in Guatemala

The Guatemalan economy, in common with the economies of the other Central American countries, is open and vulnerable to external events. Since the 1960s the economy has relied on the export of both traditional agricultural raw materials to industrialised countries and manufactured products to the other Central American countries; both groups were the base for the traditional export-led growth model. It suffered from internal as well as external constraints due to the reduction of domestic-use agriculture, increasing import dependence of production, declining international demand, worsening terms of trade and restricted capital markets (Bulmer-Thomas, 1987). The 1980s faced the country with the effects of the second oil crisis and subsequent OECD recession, which caused balance of payments deficits due to a substantial increase in oil prices, further deterioration of the terms of trade, and a rise in the cost of servicing the external debt. The effects of the foreign shocks, combined with political and social upheaval, led to the worst economic performance since the 1930s. Gross domestic product (GDP) declined drastically from 1980 to 1982 and the fall continued through 1986. In 1987 and 1988 GDP increased at 3.1 per cent and 3.7 per cent, respectively. However, in terms of social cost, the decade was disastrous: GDP per head in 1988 was 20 per cent lower than the 1980 level, the rate of urban unemployment averaged nearly 40 per cent and around 70 per cent of the population lived in poverty.1