Poverty reduction in Guatemala remains as one of the key challenges to be dealt with before a more balanced and socially inclusive economic growth could be achieved.
Poverty
According to figures in 2006, 6.6 million people are still living under poverty and a third of this figure, or 2 million people, are struggling with extreme poverty.http://www.undp.org/execbrd/pdf/ADR-Guatemala.pdf. ''Assessment of developmental results.''. UNDP, 2008, p. 59.
Moreover, despite a fall in extreme poverty during the 1990s, Guatemala’s dependency on
export
An export in international trade is a good produced in one country that is sold into another country or a service provided in one country for a national or resident of another country. The seller of such goods or the service provider is an ...
s and susceptibility to global price shocks such as the world coffee crisis and natural disasters such as the Tropical Storm Stan in 2005 has led to a subsequent increase of the poverty rate in 2004 and falling again in 2005.
Notwithstanding a recent fall in the
poverty rate
Poverty is the state of having few material possessions or little
, both external and natural events continue to exert great influence on poverty levels in Guatemala. Consequently,
poverty alleviation
Poverty reduction, poverty relief, or poverty alleviation, is a set of measures, both economic and humanitarian, that are intended to permanently lift people out of poverty.
Measures, like those promoted by Henry George in his economics clas ...
Latin America
Latin America or
* french: Amérique Latine, link=no
* ht, Amerik Latin, link=no
* pt, América Latina, link=no, name=a, sometimes referred to as LatAm is a large cultural region in the Americas where Romance languages — languages derived f ...
, ( Gini coefficient of 0.55), many disparities exist between different economic sectors and income groups, reflecting a large rich-poor divide in Guatemala. Further data has shown that only 3.8 percent of the country's total
income
Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. Fo ...
is earned by the poorest 20 percent of the population, compared with the 60.6 percent earned by the richest 20 percent of the population
Furthermore,
income inequality
There are wide varieties of economic inequality, most notably income inequality measured using the distribution of income (the amount of money people are paid) and wealth inequality measured using the distribution of wealth (the amount of we ...
in Guatemala is accentuated by regional differences, namely, 1) a large rural agrarian sector and 2)
social exclusion
Social exclusion or social marginalisation is the social disadvantage and relegation to the fringe of society. It is a term that has been used widely in Europe and was first used in France in the late 20th century. It is used across discipline ...
.
Inequality and Agriculture
Agriculture
Agriculture or farming is the practice of cultivating plants and livestock. Agriculture was the key development in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that enabled people t ...
is one of the primary sectors in Guatemala (22.2 percent of GDP), producing principal cash crops such as
coffee
Coffee is a drink prepared from roasted coffee beans. Darkly colored, bitter, and slightly acidic, coffee has a stimulating effect on humans, primarily due to its caffeine content. It is the most popular hot drink in the world.
Seeds of ...
, sugars and bananas. Together with other non-agricultural products, they contribute towards 75 percent of export earnings. The agricultural sector employs about 39 percent of the national workforce, resulting in suppressed wages and low productivity. This provides some explanation for the rural-urban dichotomy in living standards.
This problem is made worse by subsistence agriculture, resulting in low productivity and value-addedness. As a result, meagre incomes push subsistence farmers into poverty. Moreover, a denial of access to credit for vital agricultural investment has often led to farmers sinking into a vicious
poverty cycle
In economics, a cycle of poverty or poverty trap is caused by self-reinforcing mechanisms that cause poverty, once it exists, to persist unless there is outside intervention. It can persist across generations, and when applied to developing count ...
which continues through generations.
Sudden and unexpected events such as natural calamities and adverse climate conditions can also threaten agricultural harvests. It is not a matter of coincidence that the rural poor often comprised a large portion of populations living within these danger zones. Understandably, the rural poor are not able to gather sufficient resources to mitigate such emergencies, such as insurance against risk. Hence, the occurrence of such events would have recurring effects on rural dwellers, pushing them into greater poverty.
Inequality and social exclusion
Poverty appears to be largely concentrated within the regional groupings in Guatemala. To illustrate, comparisons between urban, rural and indigenous, non-indigenous people have shown that the non-indigenous groups fare considerably better than their indigenous contemporaries, comparable on a similar level to the national average of
Cameroon
Cameroon (; french: Cameroun, ff, Kamerun), officially the Republic of Cameroon (french: République du Cameroun, links=no), is a country in west-central Africa. It is bordered by Nigeria to the west and north; Chad to the northeast; the C ...
, which ranks 144th on global HDI rankings with a score of 0.0506(HDI). As a result of social exclusion, the Q’eqchi ethnic group's HDI is relatively lower than the national average of 0.560.
Furthermore, the 38 percent poverty rate experienced by the rural
indigenous
Indigenous may refer to:
*Indigenous peoples
*Indigenous (ecology), presence in a region as the result of only natural processes, with no human intervention
*Indigenous (band), an American blues-rock band
*Indigenous (horse), a Hong Kong racehorse ...
population is almost twice the national average of 21.9 percent and at least 20 percent greater than their urban contemporaries, highlighting a rural-urban divide in terms of development.
In sum, the deprivation of the rural poor from opportunities of personal growth and development is a reflection of their disadvantaged economic circumstances. While the urban sector has been reaping relatively higher economic growth, the rural poor have been marginalized, bypassed and socially excluded from full economic participation in the Guatemalan economy.
*Graph created to showcase above-mentioned
case study
A case study is an in-depth, detailed examination of a particular case (or cases) within a real-world context. For example, case studies in medicine may focus on an individual patient or ailment; case studies in business might cover a particular fi ...
.
Foreign debt
Lastly, coupled with a high foreign debt totaling $5,496 million according to 2006 figures, the Guatemalan economy became even more depressed with this large sum of foreign debt obligation. This has been supported by various studies that pointed out how a large foreign debt could potentially deplete a country's
capital stock
A corporation's share capital, commonly referred to as capital stock in the United States, is the portion of a corporation's equity that has been derived by the issue of shares in the corporation to a shareholder, usually for cash. "Share capi ...
, thereby reducing much-needed investment opportunities vital for economic growth. However, the positive impact of economic growth on
poverty reduction
Poverty reduction, poverty relief, or poverty alleviation, is a set of measures, both economic and humanitarian, that are intended to permanently lift people out of poverty.
Measures, like those promoted by Henry George in his economics cl ...
should be taken with a word of caution. While there is a positive
GDP
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...
growth of 4.5 percent in that same fiscal year in Guatemala, it has done little to reduce poverty. With economic growth bearing no absolute causality on poverty reduction, there is a need for the social determinants of poverty to be looked into. According to Vlahov, et al., "The social determinants approach to health emphasizes improving living conditions in such arenas as housing, employment, education, equality, quality of living environment, social support and health services."Vlahov, D., Freudenberg, N., Proietti, F., Ompad, D., & Galea, S. (2014). A conceptual framework for organizing determinants of urban health. Thematic paper, 1.