Wednesday, December 17, 2008

What holds Guatemala back: 2 - The State

From the outside Guatemala's state looks like one of those houses that someone decided to start building before they had the finances to finish it. We have several fine examples nearby. The ground floor is more or less complete, but the next level up is little more than a concrete terrace through which rusty iron rods poke skyward, testifying to the delayed ambitions of the occupants.

Like many of the neighbouring states this was one whose early growth was paid for by various kinds of inflationary financing and debt, because the wealthy haven't ever been willing to cough up. 

Even in the democratic era - and in spite of some clear stipulations in the peace accords - total taxation as a share of GDP is well below the developed country average of 29%. Excluding social security contributions the figure here is closer to 10% - and it is said by leading economists that the state needs a tax take of at least a fifth of GDP in order to provide basic public goods. (Such as the education and the police service which will be covered in later posts.)

The currently parlous state of the world's economy is not going to help much either. Fiscal authorities have reported a take last month of Q2.4bn, the lowest of 2008, and 7.9% lower than the equivalent revenues collected in November 2007.

Still, there has been a measure of successful decentralisation over the last few decades and both Antigua and Guatemala City, benefit from local government by mini-states run by apparently competent and reform-minded alcaldes. In the capital for example, Arzú has successfully transplanted Bogotá Mayor Enrique Peñalosa's Transmilenio - a modern transportation system (itself based on Brazil's Curitiba) in which articulated buses run along their own carriageways with fixed stops that are more like London's DLR than a common-or-garden bus stop. (Here it has been dubbed the Transmetro)

But then there's a pending post in this series entitled 'Neglect of the Countryside'.

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