The Systemic Weakness of Guatemala’s Competitiveness

Abstract

In response to disequilibria, traditional economic theory tends to concentrate on stabilisation and adjustment through exchange-rate policy that favours the production of tradables, fiscal policy that reduces deficits, and trade reforms that eliminate anti-export biases or which favour exports outright. However, it has become increasingly clear that the development of international competitiveness goes beyond this simple recipe, and that it has additional ‘systemic’ requirements (ECLAC, 1990a). Guatemala’s experience, especially from 1987 to 1992, illustrates how the initial contribution of stabilisation and exchange-rate policy to growing exports may be threatened by the weakness of these other requirements. These include physical infrastructure, education, and institutional arrangements. In Section 15.2 a description is presented of basic exchange-rate policies and trade reforms adopted from 1980 to 1992 and attempts to determine their effects on export and investment performance. Section 15.3 deals with export performance, in particular with the development of non-traditional and manufactured exports. Section 15.4 reviews systemic obstacles to the further development of these exports. In Section 15.5 the main conclusions are summarised.