patth@ccnysci.UUCP (08/20/89)
Ported from PeaceNET: /* Written 12:15 am Aug 17, 1989 by cries in cdp:cries.regionews */ /* ---------- "Guat: Fighting Over Scraps" ---------- */ GUATEMALA: FIGHTING OVER SCRAPS AND HANDOUTS Last March, the Ministries of Finance, Economy, and Banking presented to the international finance community in Paris (the World Bank, International Monetary Fund, Interamerican Development Bank, and AID) the document, "Multiplying Development: A Guatemalan Strategy". The objective: to obtain a substantial increase in financial aid. On hearing of this, Guatemalan businessmen began demanding control of these resources. The document presents the medium term economic project of the Christian Democrats, designed mainly by Finance Minister Rodolfo Paiz. Once again, the government intends to define a new "economic model" based fundamentally on two proposals: promotion of non-traditional exports and creation of a "Social Investment Fund" in order to pay the "social debt" owed to the people of Guatemala with international financing, by beginning to make improvements in the areas of health, education, and communications. The document presented in Paris includes a few novel ideas with regards to prior government proposals. It emphasizes that the new law governing assembly plants has already been approved after spending two years in Congress. This law concedes tax and tariff advantages to foreign businesses which are set up with the intention of exporting goods outside the Central American region. Demanded by the World Bank as a condition for giving $80 million in credit to support private enterprise, this measure is, in fact, the only visible thing of substance in the entire document. Propositions, Promises, Illusions The rest of the proposals are simply propositions, some of which have already been repeated beyond the saturation point, like the one about attracting foreign investment, heard countless times before. Others are less realistic, such as basing the promotion of non-traditional exports on small-scale campesino production. And some are completely illusory, such as asking large agricultural landowners to rent their idle land to landless campesinos in order to increase that sector's productivity. As such, the Paris document succeeds in being a written justification to solicit more economic aid from the international financial organizations. In this sense, it emphasizes - once again - the achievements of the Stabilization Plan begun in 1986 by the Christian Democrats. Controlling inflation and stabilizing the exchange rate are the real arguments being used to ask the financial organizations for a contribution equivalent to 2% of the country's gross domestic product (GDP) for 1990, all the while "supposing that Guatemala continues to receive donations equivalent to approximately 1% of its GDP from the US government." In concrete figures, US aid in 1989 reached $153 million and Guatemala is waiting to receive $40 million and $80 million loans from the IMF and World Bank, respectively. The proposed goal for 1990 would top $300 million. Businesses Against The Aid The optimistic image of economic progress presented by the government in Paris was immediately contested in Guatemala by CACIF, the principal private sector organization. The business leaders denounced that the government Stabilization Plan "will strangle the economy and produce a deceleration in growth to 3%, compared to 3.5% in 1988." Over the past few months, the private sector has increased pressure aimed at lifting state controls on the economy. It accuses the government of "strangling" growth with its fiscal measures and its control over credit and exchange and interest rates. Revenue from re-investments in Guatemala has gone down from $104 million in 1988 to only $41 million so far this year. CACIF blames this "investment strike" and its effects on the government. Business leaders claim that in 1980, 68.8% of the population had normal employment, while in 1988 that number had gone down to 56.8%. Unemployment, which was 2% in 1980, reached 9.6% in 1988, and underemployment rose in the same period from 29% to 33.5%. They also emphasize that the fiscal deficit reached 16% of the GDP, not 3.2% as claimed by the Finance Ministry. The reason behind this disagreement is that business leaders refuse to consider credit, aid, and donations as state income, but rather as handouts. "We're living on handouts," they say, "which don't help the country grow while 40% of our export earnings go to pay the foreign debt." "The lack of defined government policies has been subsidized by loans instead of being corrected by letting private enterprise push forward the country's development," claim business leaders. At the same time, they insist that the International Monetary Fund is still conditioning the granting of a $40 million loan on major measures which would definitively liberalize the economy. The presentation of the document has shown the opportunistic character of the private sector's accusations. A key element within the government's strategy to "multiply development" is the channeling of foreign aid towards a Social Investment Fund that, according to the Paris document, "must be administered by the country's private sector." This phrase was apparently included to please the neo-liberal instincts of the international organizations but was quickly remedied upon return to Guatemala by naming the Finance Ministry as administrator of the desired Investment Fund. Then private enterprise did an about face and forgot its scornful opinion of the "foreign handouts" and demanded to be in charge of administering these resources. An underlying discussion behind this struggle centered on how much of a role the state and private enterprise should play in solving the country's underdevelopment problems. "Integral Development" Young Guatemalan business leaders have abandoned in the past few years the archaic "trickle-down" theory, according to which public investment programs in social fields were pure third world demagogy, and that the very growth of capitalism was what created development and social well-being that "trickled down" from the cup of the companies' profits. As the 80s approached with revolutionary and popular movements convulsing the entire Central American region, the "trickle down" theory was forgotten by business leaders. The most enlightened and progressive among them recognized that reforms or social investments were indispensable not only to guarantee political stability but also to promote development of the economic system. Then, in the mid-80's, the myth of the private sector as protagonist in the social arena began to arise, promoted by US neo-liberals and some Latin American ideologists such as Peru's Mario Vargas Llosa. If a determined "investment" in the social arena was destined to occur, better that it involve the profiteering spirit of private enterprise rather than getting lost in the corruption and bureaucracy of the populist governments. In Guatemala, this current rapidly encountered fervent champions that had already started to demand the privatization of state-run enterprises. From there, they quickly moved on to demand that public services such as education and health also be administered by the private sector. This current counted on enthusiastic support from the local AID office, the greatest source of pressure in favor of the private sector controlling the "handouts" of the Social Investment Fund. The Guatemalan government has had an ambiguous attitude towards these pressures from private enterprise. One Christian Democrat sector - labelled the most conservative - is partisan to the "State as Subsidizer" philosophy, claiming that the State should only intervene with social programs in those situations or places where private initiative is incapable of creating well-being. This current, represented especially by the Ministry of Development, has been able to "associate" the government with numerous non-governmental development organizations and private business foundations, on some occasions within the counterinsurgency programs of the army. The other current within the Christian Democrats, expounded mainly by the Ministry of Finances, is partisan to the paternalist and popularist "State as Benefactor" philosophy. According to this philosophy, social welfare and development programs create the basis for the growth of capitalism throughout the country and strengthen the bond of the campesino communities to the Christian Democrat government. This current elaborated and presented the Paris document. However, in three years of Christian Democratic government, the integral development proposed in the document has not even started. This is mainly because more than 70% of the state budget is earmarked to maintain the government, that is to say, to keep the heavy bureaucratic machine running. "They can't build new hospitals, because just to keep the ones that already exist running takes the entire budget of the Health Ministry," affirm the business leaders. The Bottom Line It's just another case of a polemic in the world of illusions. The present reality of the economy, nationally and internationally, is going in a different direction. International loans or donations continue to be conditioned to adjustment programs that aren't in the least bit "integral". The Paris document, in speaking of the 1989 economic program, promises the large multinational banks that "the tariffs of the public businesses will continue to be revised in order to avoid subsidies." The commitment is made to maintain "prudent salary policies" and a "strict credit policy". --- Patt Haring | UNITEX : United Nations patth@sci.ccny.cuny.edu | Information patth@ccnysci.BITNET | Transfer Exchange