ABSTRACT: This paper argues that Guatemala's economic growth depends on eliminating the social gaps that hinder economic dynamism, as well as on promoting the variables that drive the economy. The first section analyzes the recent performance of the Guatemalan economy, finding that the reduction of import tariffs has led to a contraction of the manufacturing and agricultural sectors and thus to a decline in the economic growth rate. In other words, trade liberalization has resulted in an opening trap. Extreme openness has also caused job losses, leading to emigration, remittances, and violence. It should be emphasized that remittances have a negative impact on domestic savings and thus on investment and economic growth rates, as well as on deficits in the goods and current accounts of the balance of payments. In addition to the stagnation trend generated by the opening trap, this paper posits the existence of an anti-development force and a development force that affect economic growth positively and negatively, respectively. The first force, the anti-development force, is represented by a vector composed of the following variables: female self-employment rates, male suicide rates, female mortality rates, adolescent fertility rates, and stunting rates in children under 5 years of age. The development force is represented by a vector with the following elements: secondary school completion rate for girls, female wage employment rate, female life expectancy, and health expenditure as a percentage of GDP. The application of principal component analysis to these vectors showed that the first principal component of each vector explained approximately 80 percent of the variance of the variables and that the variables had coefficients with the expected signs. It was found that the estimation of error correction equations showed that the first principal component of the anti-development variables had negative effects on the investment and economic growth rates, on the demand for money, and contributed to the growth of the trade and current account deficits, as well as positive effects on the bank interest rate. The effects of the first principal component of the development variables showed significant coefficients with signs opposite to those shown by the anti-development principal component. The study concludes with a proposed agenda of investment programs aimed at addressing the social gaps that hinder development in Guatemala.
Luis René Cáceres Araniva (Sun,) studied this question.