RESTRICTED

FllE CoPy Report No.W.H. 52a

This report was prepared for use within the Bank. In making itavailable to others, the Bank assumes no responsibility to them forthe accuracy or completeness of the information contained herein.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPNIENT

CURRENT ECONOMIC POSITION AND PROSPECTS

OF GUATEMALA

February 5, 1957

Department of OperationsWestern Hemisphere

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CURRENCY

Quetzal

Qi 1 U.S. $1

CONTEN1TS

BASIC DATA

Page Paragraph

SUMMAP.Y i 1 -

I- GENERAL 1 1-11

II - RECENT ECONOMIC DEVELOFM51TS 4 12 -42

Agricultural Production 5 14 -21Industry and Mining 6 22 -25Other Economic Activities 7 26 -28!toney, Credit and Prices 8 29 -33Foreign Trade and Balance of Payments 9 34 -36Public Finance 10 37 -42

III - LONGER RANGE PROSPECTS U1 43 -51

APPENDIX - The National Economic Planning Council 16 1 -13and the Five-Year Development Progeam

Underlying Assumptions 16 3 - 4Size and Compsition of the Program 18 5 -10The First Year of Execution 20 U -13

STAlISTICAL TABLES

Table 1 - Gross National Product or E'xpenditure, 22194E-1955

Table 2 - Per Capita G.N.P., 1948-1955 23Table 3 - Agricultural Producticn, 1247-48 to

1955-56 24Table 4 - Government Receipts and Expenditures

1948-149 to 1955-56 25Table 5 - Government Revenues, 1948-49 to 1955-56 26Table 6 - Internal Debt, 1954, 1955 an.... 1956 27Table 7 - Money Supply and Gold and Foreign

Exchange Raseives, 1949-1955 28Table 8 - Balance Sheet of Banco de Guatemala 29Table 9 - Banking Statistics, June 30, 1956 30Table 10- Government Financial Institutions 31Table 11- Price Movements, 194C-1955 32Table 12- Balance of Payments 1950-1955 33Table 13- Composition of Exports, 1948-1955 34Table 14- Composition of Imports, 1950-1955 35Table 15- Direction of Foreign Trade 36Table 16- Coffee Exports, 1918-L9 to 1955,-56 37Table 17- Prices of Imports and Exports, and

Terms )f Trade, 1948 to 1955 38Table 18- Public Investment Program, 1955/56-59/60 39Table 19- Summary of External Public Debt. 40

BASIC DATA

Area 42,042 square miles

Population, 1955 3,281&,000

Gross Nlational Product, 1955: (Q million)

Consumpticn Expenditures 444.0Current Government Expenditures 57.6Public Investment 35.2Private Investment 47.5Net Foreign Investment -5.3

Total 579.0

Per Capita Gross National Product, 1955 Q176.5

Public Finance, July 1955 to June 1956:

Total Expenditures 83.7Budgetary Receipts 77.4Revenues Assigned to Sinking Funds 5.7Net Deficit -o.6Gross Borrowings 6.8

Government Debts, June 30, 1956:

Internal: Funded 23.4Floating & Short-term 18.0

Foreign: Recognized 21.2Status in disnute 1.2

Money & Credit, June 30, 1956:

Currency in circulation 53.4Demand deposits of public 40.6Net gold & foreign exchange reserves 72.4

Balance of Payments, 1955:

Exports, f.o.b. adjusted 106.3Imports, f.o.b. adjusted 93.3Services (net) -18.3Current account deficit - 5.3Donations 9.6

Exports, f.o.b. Imports, f.o.b.(Q million) (Qmillion)

Coffee 75.2 Live animals o.6Bananas (undervalued) 9.4 Foodstuffs & Beverages 14.3Chicle 1.4 Raw Materials 10.7Lumber 0.5 Manufactures 66.3Essential Oils 1.1 Machinery & Equipment (24.4)Other 10.9

Total 98.7 Total 91.9

To: United States 74% From: United States 64%Western Europe 20$ Latin America 14%Latin America 2% Cont.WesternCanada 2% Europe 114%Other lp United Kingdom 4%

Canada AOther 1%

SUM4ARY

1. The Guatemalan economr, at least the monetary sector, has beenexyeriencing a rapid expansion since mid-1955, following a period ofeconomic stringency and dislocation after the revolution of June 1954 andseveral years of semi-stagnation before that date. A maior factor in thisgrowth is an ambitious program of public works, especially highway con-struction, financed in large part by foreign grants and loans; but pri-vate investment, including an important component of foreign and repatriatedcapita], has also increased substantially. The general policies of thepresent Government, whose period of office ends in 1960, together with theoppcrtunities available for increasing agricultural, forest and mineralsproduction, seem conducive to a continuance of such investments, and con-sequently to continued growth of the economy after 1958 even without fur-ther external grants (although perhaps at a somewhat slower rate).

2. Agricultural production has not so far expanded in proportion tothe increase in total output, as a result partly of adverse weather con-ditions in 1954/55, but also of more fundamen ,al factors. A major ob-stacle is the sharp dichotomy existing between the commercial and subsis-tence sectors of the econcny, and the extremely low productivity of thelatter; the possibility of its beins substantially improved in the shortterm is limited by the native communitiest distrust of and isolation fromthe Ladino populatien, which can only gradually be broken down. In theconmmercial sector a small but iniluential minority of farmers are seekingto alter the traditional pattern of agricultural output, through develop-ment of idle or underutilized land, mechanizaticn, new crop varieties andcultivation techniques, etc.; they are hampered by inadequate medium andlong-term credit facilities and marketing arrangements. The contemplatedtransfer of the national farms to private hands should bring about higherlevels of productivity on these important holdings.

3. Besides agriculture., output of industrial, timber and mineralproducts is expanding, and these fields offer considerable promisefor thefuture. Intensive and widespread e.;ploration for oil has begun. Touristtraffic is increasing rapidly, and will receive a major stimulus fromthe opening of the Inter-American Highway in 1958. There appear to begood prospects, therefore, despite the dubious outlook for coffee prices,for a steady growth of GNP and export receipts, at a rate of perhaps 5%per year. Given the very rapid rate of pcpulation growth, this would per-mit living standerds to rise by only about 2% per year.

4. After a brief decline, money supply has risen sharply sinceearly 1955, reflecting the rise in foreign exchmnge reserves. The Bancode Guatemala has kept a fairly tight rein on credit expansion and theGovernment has followed a generally conservative budget policy (facili-tated by extraordinery receipts from foreign grants and loans). The

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cost of living has risen by only about 1 per year, but there is somedanger that this rise may accelerate in the short-term future.

5. In 1955 the value of exports was about 8% higher than in 1953,and the upward trend probably continued in 1956; imports rose by nearly30p in the same period, resulting in a deficit of $5 million on currentaccount. However, the influx of private capital and foreign loans andgrants, (the latter of which are expected to continue until mid-1958)was sufficient to offset the current account deficit and permit a $15millior increase in foreign exchange reserves; it is expected that thisreserre accumulation will be drawn down moderately in the years after1958 to permit a continued high level of investment without undue priceincreases.

6. The Government has adopted a five-year (1956-1960) program ofeconomic development, emphasizing private enterprise and investment butspecifically envisaging public investments of about Q 250 million. Thisgeneral order of magnitude seems reasonable. The program of specificinvestments heavily stresses construction and improvement of highways,the lack of which is a major obstacle to the national eccnomic development;however, some shift of emphasis toward measures directly to stimulateproduction, especially in agriculture, and to improve rural education andhealth, seems desirable. The National Economic Planning Council, establishedwith advice and assistance from the Bank, is currently revising the pro-gram along these lines.

7. This investment program still needs to be refined considerably,adjusted periodically, and supplemented by a number of fundamental insti-tutional and administra`ive measures; but in general it appears to pro-vide a satisfactory basis on which to build the country's economic develop-ment. It has gotten off to a fairly good start in its first year.

8. The service of Guatemala's present external debt (not includingthe disputed sterling debt), requires only about 2% of the value ofcurrent exports; the prospects for expansion of production and exportsseem generally favorable; budgetary receipts are rising and internalbonded debt is being amortized at a rate that would permit its redemptionwell before maturity. The country could safely assume additional foreigndebt for sound productive projects.

I. GENEDAL

1. The Government of Guatemala ieaded by President Arbenz, whichwas overthrown in June 1954, left a legacy of financial and administrativedisorder, and demoralizaticn of the national economy. The new Govern-ment of President Castillo Armas, despite some initial confusion as tospecific measures, made clear its intention to alter fundamentally thepolicies of the previous regime which had militated against private pro-ductive activity and investment of foreign capital, ard to create aneconomic and political climate conducive to private enterprise. It tookas a general guide the recommendations of the Survey Mission organizedby the International Bank in 1950/51, and asked that the Bank assign aresident representative to assist the Gcvernment in formulating a definiteprogram to carry thcm out. The Bank acceded to this request, and fromFebruary 1955 to September 1956 maintained a Special Representative inGuatemala, assisted during part of this period by another Bank staff member.

2. The general orientation of the new Government is evidenced invarious measures taken in the past two years: in the removal of unrealisticrestrictions on rents, interest rates,meat prices, etc.; in its treatmentof foreign capital; in its pDlicies on exploitation of natural resources;and perhaps most importantly, in the changes it made in the agrarian andlabor laws, and especially ir. their administration.

3. Under the previcus regime the labor courts had invariably foundin favor of employees and syndicates even when the law appeared to be onthe other side. The Governnent had openly supported communist-controlledunions, even threatening emplcyers who resisted their demands with ex-propriation. The prusent labor code preserves most of the legal safeguardsof the earlier lafr, but had modified some provisions that had been inter-preted in especiLlly arbitrary fashion. The principal unions have beenreorganized under new leadership with governmental encouragement but withoutits direct backing; they have not yet, however, acquired much independentstrength. A Ministr-y of Labor, separate from the inistry of Economy, hasrecently been created.

4. The agrarian law, whose prcvisions were mcderate enough in them-selves, in the last years of the Arbenz regime had been turned into aninstrument of arbitrary confiscation and political reprisal. With theencouragement of Government officials, estates were invaded without legalsanction, and pasture and crop lands, as well as idle acteage, were takencrer and split up indiscriminately into tiny, uneconomic plots. Littletechnical or financial assistance, and often no title or other securityof tenure, were given to the recipients of these lands. The present Gcvern-ment has continued th;e parcelling of idle land, in a program that calls forresettlement of over 5,000 families per year through 1960. Its emphasis,however, is on establishing viable family farm units of 10-20 hectares,with necessary roads and community services, with supervised credits for

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the ncw farmers, and with clear title of ownership after a brief pro-bationary period.

5. The new petroleum code was criticized by the oil companies, inthe drafting stage, as being unduly severe; but twenty-nine companiesfiled for permits as soon as it became law. A settlement was reachedwith the United Fruit Company, by which it turned over substantial tractsof land to the Government and made certain tax concessions, in return forsafeguards to permit its undertaking large-scale new investments in landreclamation and new plantings. The concession agreement of the Inter-national Railways of Central America (IRCA) was similarly renegotiated onterms more favorable to Guatemala, and negotiations for revision of thecontract of the Eipresa Electrica de Guatemala (an American and ForeignPower subsidiary) are in progress.

6. These measures have fostered a marked increase in private in-vestment - up an estimated 280, in real terms, in 1955 over the level ofthe two previous years, and apparently still farther in 1956. An evengreater stimulus to economic expansion has been provided by an anbitiouspublic investment program, an important share of which is financed fromexternal sources; over $50 milliLn of U.S. grants have been programmed(and some $20 million expended through June 1956), and the IBRD has madea loan of $18.2 million. The resulting increase in Gross National Productin 1955 over 19548 may be estimated at 5-6% at current prices, and evenmore in real terms; and there is every indication of further substantialexpansion in 1956. By contrast, in the period 1948-53 the indicatedgrowth rate of real Gross 'lational Product was less than 2% per year, despitean improvement of 60M in terms of trade (Table 1).

7. The Government has adopted, in principle, a 5-year developmentprogram drafted by the National Economic Planning Council, which projectspublic investments of Q 250 million during the years 1955/56 through 1959/60(Table 18). The Council's report stresses that these public investments"'will justify themselves only if they serve as the indispensable foundationand effective stimulus for directly productive economic activities,, whichmust be undertaken principally by private persons;" and that'lin esti-mating the amount of public investment that Guatemala may permit itself,special care was taken to leave an adequate margin of resources for therecuirements of the private sector." It estimates that this margin wouldamount to nearly Q 300 million over five years, leaving to private initia-tive the allocation of this sum.

8. The Council's estimates of Guatemala's investment capacityappear optimistic but not unreasonable; and given the traditional timidityof Guatemalan financiers, a relatively sanguine attitude on the part ofthe Government seems appropriate, or even necessary, to encourage therequired private investment. A more serious obstacle than financial capacity,to the execution of the proposed program, are the organizational deficiencies

of both Government and private institutions, and the shortage of adminis-trative and technical personnel. (See App~endix for further discussionof the five-year program).

9. Certain adjustments in the composition and emphasis of the publicinvestment program appear desirable in the light of further studies anddevelopments since it was first formulated. On the whole, however, itseems well-designed to meet some of the principal problems of the Guatemalaneconomy - its excessive dependence on a single product, coffee; the undueconcentration of population in the highlands, while the resources of thePacific coastal zone, the North and the Peten remain largely undeveloped;and the inadequacy and high cost of tr- .sportation. The investmentsproposed and the policy and admiristrative measures recon^mended should alsohelp substantially to create the foundation and incentives required forproductive private activity.

10. The program is directed primarily at development of thecommercial economy of Guatemala, which now engages only a minority ofthe total working population but probably accounts for two-thirds of thevalue of national output. The "native" majority are economically, sociallyand culturally isolated, living still almost in the pre-Columbian pattern,and deeply distrustful of the dominant Ladino (Europeanized) minority;their transition into the modern world is inevitably a difficult process.Nevertheless, the more vigorous and adaptable of them are making it al-ready, influenced by the increasing pressure of population on their low-level subsistence economv, the attractions of urban life and rising wagesin the money economy, and the increasing ease of transportation. Theprocess will presumably accelerate as more employment opportunities develop.The "Indian problem", as such, is likely eventually to disappear throughthe progressive absorption of the "natives" into the Ladino community. Butthis absorption can probably be eased substantially and the tensions itcreates reduced, through educational and welfare programs such as theGovernment has already init-iated on a limited scale, with foreign tech-nical cooperaticn.

U1. Of no less importance than the Fublic investment program,especially for enccuraging private enterprise and investment, are a num-ber of legal and institutional reforms or innovations which are in prepar-ation or under active study. Among them are:

(a) Development of an improved capital market. A stockexchange law is being studied, and a group of Guatemalanand foreign entrepreneurs are attempting to form a finan-cial corporation for diversified equity investment.

(b) A revised industrial promotion law, which should sub-stitute clearly defined, generally applicable tax or otherconicessiens for the broad administrative discretion providedunder the present law.

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(c) Reform of the business profits tax andinstitution of a soundly-based Personal income tax.

(d) Establishment of a satisfactory law and adminis-trative framework for the regulation of public services.

(e) Establis Lent of satisfactory policy and adminis-trative ma: ery for stabilizatic*n of the domestic grainmarket.

(r) Definition of policy and specific measures for dis-posal of the N tional Farms (fincas nacicnales).

(g) Improvement of agricultural credit facilities,especially for medium and long-term development needs.

(h) Organization or reorganization of several importantGovernment agencies - the proposed Housing and MunicipalDevelopment Institutes, the State Hydroelectric Company,the national telecomaunications administration, etc.

(i) Reform of the budgetary, accounting and financialcontrol machinery of the Government.

(j) Improvement of systems of production and marketingof Guatemalan coffee.

U. PECENT ECCNuMIC DEVELOP?ENTS

12. The economic history of Guatemala since June 1954 falls intotwo distinct phases. The first, lasting 2pproximately a year, was aperiod of economic and political uncertainty, aggravated by a sharp dropin the price of coffae from the 1954 peak and by poor grain harvests. Thecautious financial policies of the new Government, which produced aneffective budget surplus of over Q 9 .illion, had a definite deflationaryeffect. Bublic and private investment was low and monetary expansion washalted. Food prices rose as a result of the poor harves., but fell againsharply following word of emergency grain import-. The decline in foreignexchange reserves during the last nine months of 1954, part'y due toseasonal factors, was recouped early in 1955.

13. The e..conomic stringency of the initial period gave way in thelatter half of 195$ to a marked expansion, which has continued to thepresent. It has beer. due partly to the measures taken by the new Govern-ment to restore confidence and encourage private investment, partly tothe renewed rise in coffee prices, and partly to the rising level ofexpenditures on public works, financed with the aid of foreign loans andgrants. As already noted the Gross Natioral Product probably rose atleast 5-6% in 1955 over 1954, private investment expanded by over one-fourth

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and public investment roughly doubled. Gross investm.ent reached anestimated 1J.3% of GNP, as against the previous peak of 12.7% in 1i953.Gold and foreign exchange reserves increased by 40c in the same year,cnd the upward trend has continued. Budgetary receipts in 1955/56 were18% higher than in 1953/54 while expenditures were only 1.5% greater.

Agricultural Production

14. The rate of growth of agricultural output, especially foodstuffs,during the past two yezrs has been disappointing (Table 3), despite someincrease in credits to agricultural aid livestock producers and a sharprise ir imports of agricultm-al equipment. The unusually heavy rains of'ast year are partly responsible, but the conservative pattern of mostagricultural produotion in Guatemala has hampered rapid expanision of outputto meet the growing demand.

15. 1954/55 was a particularly bad year for Born and beans, the twomain staples in the popular diet, and a serious food shortage was avertedonly by importing 2.5 miillion iuintals of corn (about 15% of normalconsumption) during 1955, fron tVht U.S. (on a grant basis) and Mexico.The 1955/56 corn crop is roughly equal to the average for recent years,but an additional 4c,O00o quintals have been irnported, financed by ICA,during 1956. The Government's guarantee of a rainimu price to producersapparently increased plantings to sone, but so far only a limited, extent.Average yields arc very 'low, because of the poor varieties, poor land andprimitive cultivation methods generally employed; the larger land-.ownersin the pla-ns have mostly preferred other crops. The orovision of bettergrain storage and marketing facilities should make production of cornEnd beans commercially more attra tive and more efficient; the Governmentis studying a oro-ran to this ena.

16. Livestock production remains substantially short of the courtry.srising require,ents; impurts of beef .^nd dairy products exceed Q 2 millionyearly. Ho-ever, the intensive efforts being made in tnis field shouldbear Iruit in the near future. Beef prices, previously controlled at10¢ per pound liveweight, have been freed and butchers now pay a premiumof 2¢ for quality. Blooded stock has been imported on a substantial andincreasing scale, under both 3overnnent and private auspices. Milkcooling and pasteuriLiation facilities have been expanded. Betternutrition and care of livestock, through pasture im,orovement, use ofsupplementary foodstuffs, disease control measures, etc., is beingemphasized by a significant number of orogressive farmers.

17. For the past ten years, the volume of coffee exports has beenalmost stationary, as a consequence largely of political insecurity andlack of enterprise on the part of plantation owners. The latter arebeginning, however, to adopt improved techniques of production -^nd makenewi plantingb; some 38 million trees are reported to have been plantedsince 1950, when thcre i:ere estimated to be 138 million trees in Guatemala.

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To a large extent, of course, such new plantings represent replacementof old trees rather than net additions; v-axt taking account also of theimprovements in yields of older trees ao d result of better methods ofcultivation, it seems reasonable to anticipate a rise of 10-20% inGuatemalan coffee production and exports by 1960.

18. Production of bananas, Guatemala' second export ci,np, began torevive in 1953 after several years of serious damage by disease. 1955exports were slightly less than those of the previous year (5.5 millionstems as against 6.3 millicn in 1954), but the United Fruit Comuany isnow planning an ambitious reclamation program to get two large tracts ofprevicusly disease-ridden land back into production. This program isestimated to require Q 20-25 million over the next 10 years and aims atmore than doubling the 1955 output, approaching the production level of1948.

19. Chicle exports have picked up somewhat and their prospects forthe next few years look moderately encouraging. Cotton, a relatively newcrop to Guatemala, has enjoyed a mild boom, with output in 1954/55 morethan double the previous year; last year's abnormal rains prevented afurther increase in proportion to the 20-30% expansion in acreage, butproduction of this crop will certainly continue to rise. Essential oilsproduction has not regained the peak level of 1951, and various othercrons suitable for the Pacific plain are being tried out on an increasingscale - sesame, castor beans and other oi 3eeds, ramie, vegetable dyeextracts, etc. The potentialities for increasing mechanized productionof tropical and semi-tropical crops in this region are promising, aidedby the recent improvement of transportation facilities.

20. The national farms, seized as enemy property durin,r the war,have a value estimated at scme Q 40 million and account for about 15% ofthe country's coffee, and a considerable part of its sugar and livestockproduction. Their condition and efficiency have deteriorated greatlyunder Government management, and inflated administrative costs have largelyeaten up their profits. The Government has recently announced its intentioito turn over substantially all these properties to private exploitation andownership, and has established a policy committee to study the difficultissues involved in disposing of such large holdings and to recommend appro-priate legal, administrative and financial arrangements. Transfer of themational farms to competent private owners should result in a substantialincrease in their productivity, as well as providing an important supple-ment to the Government's resources for necessary public investments.

21. An important possibility for expansion, both to meet local needsand for export, is timber production. Guatemala's vast forest resourceshave hitherto been exploited only to a very limited extent. The Govern-ment is now, however, granting long-term concessions to Guatemalan andforeign private companies to extract and process timber, mainly tropical

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hardwoods, on a sustained-yield basis in the Peten region. Three con-cession arf-is haze so .ar been defined, and permits granted through com-petitive bids. It is hoped that timber exports, which in the past havenever reached Q 1 million, may be at least Q 3 million by 1958.

Industry and lining

22. The industrial production index, which remained almost con-stant from 1950 through 195h, rose by 5, in 1955 and for the first fivemonths of 1956 averaged 3.6% above the same period of the previous year.A number of manufacturing industries are being started or expanded,including cement, plywood and veneers, flour, plastics, aluminum pro-ducts, toilet preparations, and truck and bus bodies. Negotiations toestablish a tire factory and a soluble coffee plant, both to combine U.S.and Guatemalan capital and management, are well-advanced. Several ofthe new or expanding enterprises are seekirg the status of "integrationindustries", under the aegis of the Commission for Central AmericanEconomic Integration, which would give thm a preferred position in themarket of the other Central American countries.

23. Perhaps the most dramatic neu development is the start ofexploration for oil under the new Petroleum Code. Twenty-nine companiesapplied for exploration permits, chiefly in the Peten, which are beingapproved as fast as overlaps are resolved; concessions covering over2.5 million hectares have already been granted. While it is too soon tcestimate the prospects for petroleum production, the exploration work initself will bring unprecedented economic activity to the almost uninhabitedforest region of the Peten.

24. Mine production, especially of lead and zinc, has also increasedsubstantially, and rapid further expansion is planned as transportationfacilities improve. Plans of the existing companies indicate a prospec-tive export level of Q 5 millicn by 1960, as against Q 1.2 million in19514.

25. Production of electric energy in the Guatemala City area in1955 was 26% greater than in 1954 and 31% greater than in 1953, and thefirst eight months of 1956 showed a further ll2 rise over the samemonths of the previous year, in spite of severe restrictions on con-sumption necessitated by the shortage of ge;ierating capacity. Thi.jdeficiency remains an obstacle to industrial growth. Negotiations havebeen under way since the end of 1955 between the Government and theEmpresa Electrica de Guatemala for contract revisions under which ti!eEmpresa could undertake a iaajor expansion program, estimated to recuireover S20 xrillicn of new investment during the next 3-5 years. As aninterim measure it has installed diesel units totalling 7,000 kw, whichhas increased the available generating capacity by about one-third and

and covered most of the accumulated deficit. But further increments,of large size and more economnical type, are -urgently needed to meetthe rapid growth in demand.

Other Economic Activities

26. Private as well as public constructicn activity is at an un-precedented high level. The value of private building permits rosefrom Q 4 million in 1953 to Q 4.5 million in 1954, Q 6 million in 1955,and an annual rate of Q 8.5 million in the first seven months of 1956.

27. Tourist trdffic to Guatemala has increased sharply in the pasttwo years and the prospects for further development seem excellent,especially after the Inter-American Highway is opened in 1956. The"Travel and Tourism" item in the balance of payments sho-wed a net creditof Q 2.3 million in 1955, as compared with approximate balance severalyears previously. income from this source siiould be substantially greaterin 1956; the Tourist Bureau hopes for 25,000 visitors this year comptredwith 10,000 in 1955. Hotels are full, and several new ones are in con-struction or planned.

28. Commercial sales increased 6% in 1954/55 over the previous year,and 11% in 1955/56 over 1954/55, as indicated by receipts from t .ebusiness turnover tax. Other indices are the yield of the stamp taxesand business profits tax for 1955/56, up 26% and 47%, respectively from1953/54 (Table 5). Unerployment, which was a real problem in 1954/55,has been sharply reduced bythe expansion of public works, private con-struction and ecanomic activity generally; and there is a genuine short-age of skilled workers. Substantial underemployment remains, however,especially in rural areas, and there is a constant influx into the nationallabor market from the Indian communities.

Money, Credit and Prices

29. In 1953 and early 1954 there was a rapid eipansion of moneysupply in contrast to the stahility of previous years. (Table 7). Asharp contraction followed the change of govermiaent, but the upward trendresumed in mid-1955 and has continued since. At tile end of December 1955and of June 1956 the money supply had increased by 135 and 20$ respectively,over the corresponding figure a year earlier. This increase was entirelyof external origin, reflecting the rise in foreign exchange reserves,and almost all of it took the form of greater demand deposits of businessenterprises. The reserve ratio on June 30, 1956 was almost at a recordhigh, because Guatemala's international reserves rose even faster thanthe money supply.

30. The value of savings deposits has increased rapidly during

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the past two years, by 335 per cent from the end of 1953 to the end ofSeptember 1956, but at that time it still amounted to only aboutQ 8.6 million, or about one-fifth of the value of checking accounts ofthe public. For the five years 1949-53 the year-end ratio between thetwo had remained at about 1E to 1.

31. During the past year the Banco de Guatemala has kept a fairlytight rein on credit, aided by the fact that all the banks (except theBank of London) depend on rediscounts or advances from it for a majorporticn of their loanable resources; the banking system as a whole,however, has become considerably more liquid since the end of 1954. Theamount of loans and discounts outstandirg rose moderately, from Q 4 0.3million at the end of June 195h, to Q 45.8 millicn a year later, toQ h9.6 million on June 30, 1956 (Table 9). Whereas in the 1954/55 periodthe credit volume of the commercial banks declined and the Governmentdevrelopment institutions accounted fcr all the increase, in 1955/56 thereverse was true; loans by the fcur private banks, specifically, increasedby nearly 25% in that year, although they still made up only about one-third of the total.

32. Two new banks have started operations durirg the past year, and athird (a Bark of America branch) will open shortly. The Guatemala branchof the Bank of London and South America has increased its capital and isconsidering a further increase, to about double its original capitalization,in order to increase its loan potential. The capital of the developmentbanks (INFOP and the Banco Agrario) is also being increased by Governmentcontributions of approximately Q 4 million in 1956/57. One of the newbanks, the Banco del Agro, is considered and is being organized as aprivate bank, but was capitalized through use of governmental taxingauthority. At the suggestion of a group of prominent agricultural producers,the Government imposed a levy on certain categories of farm products -

equal in most cases to the previous yearls special "liberation taxes"(paragraph 37 below) - the proceeds to be returned to the respectivecontributors in the form of capital stock in the new bank, which wouldspecialize in agricultural credits. Approximately Q 3 million was assembledin this way, and the bank has started operations under an interim directora'e,pending confirmation of individual share holdings and a general stock-holders' meeting. The unorthodox method of raising this capital causedconcern in local financial circles, which now seems to have subsided, however.

33. In spite of the growth of money supply, prices have remainedrelatively stable. The cost of living index for Guatemala City was lghigher, on the average, in 1955 than in 1954, and 16 higher fcr thefirst eight months of 1956 than for the same months of 1955. Otherindices show the same general picture (Table 11). Somewhat greater priceincreases are likely, however, in the short-term future.

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Foreign Trade and Balance of Payments

34. Guatemala's overall balance of payments has shown a large surplusduring the last two years (Table 12). Although the surplus on merchandiseaccount was smaller than in previous years because of the substantial risein imports - largely accounted for by emergency grain purchases and a one-third increase in capital goods imports - there was some improvement inthe services account. More significant were a large influx of capital(including some reversal of the capital flight of earlier years) and theinitial receipts from U.S. aid. As a result, foreign exchange reservesincreased by over Q 15 million in the course of the year, a trend whichhas continued in 1956.

35. The price of coffee is, and for the next few years will doubtlessremain, the principal factor affecting the balance of payments. The declinefrom the peak prices of mid-1954 proved to be less than was feaeed, andwas compensated in 1955 by an increase in the volume exported; and therenewed price rise in 1956 put the value of coffee exports for the 1955/56 crop11% ahead of last year. The Guatemalan Government and growers are awarethat; future price prospects are doubtful, but hope that the recent patternof a wider price margin for their mild coffees over the Brazilian andAfrican grades will continue to prevail. The volume of exports should alsoincrease in the next few years as a result cf recent plantings.

36. At the seasonal peak in Nay, 1956, Guatemala's gold and foreignexchange reserves reached a level of about 074 million, about 70% of annualimports and nearly half again as high as the 450 million which recentmonetary studies have suggested would be adequate. They are expected to bestill higher in 1957. This reserve accumulation will permit Guatemala toco.ntinue the present high level of investment past the period of extra-ordinary U.S. aid; in the projected 5-year program the Guatemalan authori-ties have allowed for a continuing rise in the level of imports in linewith the requirements of the development program and the increase in consumerincomes, foreseeing balance of payments deficits and a moderate drawdown ofreserves in the period 1958-1960.

Public Finance

37. The Government has followed a generally conservative budgetarypolicy during the past two years. The new regime at first imposed drasticreductions in administrative and public works expenditures. The decline ineconomic activity and rise in unemployment at the end of 1954, however,forced a change in this policy. A number of "emerge3.cy'l public works pro-jects and other measures were undertaken, financed by the initial allocations

of-U.S.'aid and-by one-time t'Liberaticn taxes" amounting to Q6.2 million. Thecoffee export tax rate fcr the 195h/55 crop,morepver, was very high,based on thepeak prices of thao lrwviousB X*~his, together witn the "Liberation taxes",resulted in record budgetary receipts of Q 76.2 million, and an effec-tive surplus for the fiscal year (taking account of net changes in thepublic debt and Government deposits) of over Q 9 millicn Ž

38. In 1955/56 normal tax revenues increased by nearly Q 5 million(Table 5), despite a small decline in coffee tax receipts, and thespecial revenues assigned to debt service rose by Q 2 million; theseincreases together compensated for the loss to the Treasury of theprevious year's "Liberation taxes". The official accounts show asmall deficit for the year, but debt amortization payments, officiallyclassified as expenditures probably more than offset this amount. Grossrevenues of the National Governmont (excluding foreign grants) amountedto 13.L of the estimated National Product.

39. The internal public debt decreased by over Q 5 million during1954/55, as against an increase of Q 19 million the previous year. In1955/56 there was a new rise of about C 4 million, mainly in the floatingdebt, and in addition the Government recogrized claims amounting to someQ8 million, which arose from operadions of the Arbenz regime which had beenneither recorded as expenditure nor previously included in the public debtfigures. (Table 6).

4o. The cfficial figures on Government receipts and expendituresshown in Table h do not permit any real analysis of its overall fiscaloperations and their economic effect, since in fact they only reflectthe Treasury accounts, taking an account of changes in the position ofother agencies of the Central Government or of municipalities and autono-mous entities. I4oreover, they show only gross expenditures and borrowingswith no offset for debt amcrtization. The balance sheet of the Banco deGuatemala (Table o), however, shows no increase in the Central Bank'sholdings of the public debt, but rather a decline roughly equal to thefall in of-Acial deposits.

/ Calculated by the BIF Mission to Guatemala, from comprehensivedata on Government debt and deposits.

- 12 -

1A. Sales of Government bonds in the past have been l-iited almostwholly to the Bank of Guatemala and insurance companies (w:hich arerequired to invest 40go of their reserves in such bonds). In 1956,.however, a wrider market has developed, to the point thrt the Bank ofGuatemala was temporarily unable to meet the denand for bonds from itsportfolio. Tnis situation resulted partly from special circumstances(notably the temporary investment of the funds collected to capitalizethe Banco del Agro), and more basically from the fact that Governmentbonds are the only really liquid investment available in the absenceof any organized capital market - the Bank of Guatemala guaranteest'heir redemption at par on demand - so that they afford a convenientapplication for temporarily idle funds awaiting more permanent investment.

42. Guatem alats oublic external debt is small, and as a result oftne deliberate policy of previous administrations to avoid foreigncommitments, is largely of recent origin. Most of the current totalof $21.2 million consists of the V18.2 million IERD loan, made ir 1955,of which 3576,000 was privately placed; as of October 31, 1956, about$6.5 million of the loan had been disbursed. This sum does notinclude the sterling bonds of 1895 and 1928, most of which were redeemedin 1944 and the balance cancelled unilaterally. The bondholders havemade representations both to the previous Administrations and the presentone, and the latter has indicated that it is giving serious study to thematter.

III. LO'GER RANGE FROS?ECTS

b3. Guatemala's present economic situation is quite favorable, andoffers a more promising prosoect of sound economic growth than has existedfor some time. It has the characteristic deficiencies of any underdevelopedcountry: a low level of per capita production, particularly of the under-employed agricultural population; a high rate of illiteracy; inadequatetransportation, power generation, education and health facilities; ashortage of skilled labor and of transferable savings; and an inefficientand cumbersome public administration. These deficiencies are compoundedby the small size of the domestic market, which precludes the establish-ment of manufacturing industries in which economies of scale lower cost;and by the legal and institutional distortions created by the Arbenzgovernment and its predecessor, which have not yet been fully corrected.It has, however, certain advantages which are lacking in some otherunderdeveloped countries: a growing urban middle class and a considerablenumber of successful entrepreneurs in agriculture and industry who havemanaerial experience and technical knowledge, and an even larger numberof would-be entrepreneurs who lack capital; a government committed to aliberal policy of cooperation with domestic capital and anxious toattract foreign capital; a sound currency secured by anple gold endexchange rcserves, and no exchange restrictions; and promising balanceof payments prospects.

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44. The rapid economic expansion of the past 18 months is due inpart to extraordinary circumstances, notably the stimulus provided byforeign grants and loans, supplementing Guatemala's own rescurces forpublic investment. It is too early to hazard a firm prediction whetherthis progress can be maintained under more normal conditions. Neverthe-less, the public investments financed in part by this aid should certainlypermit a much wider and more efficient use of the country's natural andhuman resources; and the interest in and opportunities for productive pri-vate investment, which are already evident, give promise of continuing growthif the present Government's generally favorable attitude toward privatecapital is properly implemented in permanent legislation and institutionalarrangements.

45. Given this initial stimulus and the favorable indications for thefuture, the Nstional Planning Council's estimate of the potential rise innaticnal output, at 5% per year for the period 1956-60, does not appearunreasonable. This would nean an average increase of about 2% per year inper capita GNP. However, most of the production increase will doubtlesstake place in the money economy, which already has a per capita productionseveral times that of the native subsistence sector. At the same time,however, the proportion of the population occupied in the money economyshould increase through the influx of workers from the native comiunities;some of the more accessible of the latter are likely to be absorbed bodilyinto the monetary sector; and in any case the barriers between the twoshould gradually become less strict. Nevertheless the extremely low livingstandards and high rate of reprod..ction of the Indian communities will con-tinue to be a drag on Guatemala's economic growth for many years to come.

46. The Pianning Council projected the resources available for itsproposed investment program on the basis of

(a) a ratio of domestic savings to GNP during the period1956-60 approximately equal to that in 1953;

(b) the maintenance of present tax rates, except for theintroduction of a personal income tax and petroleumexploration fees, together yielding about Q 2 millionper year;

(c) the external grants already approved at the end of 1955;

(d) foreign loans of Q 21.3 million, consisting of the IBRDhighway loan plus Q 3.1 million for two other small pro-jects presented to the Bank; and

(e) the internal loans already granted or approved by theBanco de Guatemala, which are to be amortized at anaverage annual rate of abcut Q 3 million during the fiveyear period.

These projections indicated total estimated resources of Q 211 million,leaving a theoretical deficit of about Q 40 million in the financing ofthe public investment program (see Appendix and Table 18). But infact most of these sources of financing are susceptible of considerableexpansion if the expected economic growth occurs; and one of them, theU.S. aid figure, has already been increased by $15 million. In addition,the national farms are an important Government asset, whose contemplatedsale should make substantial additional sums available for public invest-ment.

47. The total size cf the proposed public investment program wouldseem, therefore, to be well within Guatemala's financial capacity, unlessthe expectations cited above are altered by some major adverse development.But certain modifications in the balance and phasing of the program seemadvisable. The Council is already planning some shift in emphasis fromhighway construction to more directly productive purposes, especiallymedium and long-term agricultural credits, and to educational and healthmeasures, especially in rural, preponderantly "native" areas. If theGovernment does not promptly reach an agreement (presumably with theAmerican and Foreign Power Co.) to obtain private financing ot' electricpower development, it would have to program additional expenditures forthis purpose also.

48. Finally, it seems unlikely that the Government will be able to"peak" public investment expenditures sharply in the current fiscal year,and then cut them back by over one-third from that level in the final twoyears of the period, as was initially planned. As a practical matter,both the "peak" and the subsequent cutback will probably be ccnsiderablymore moderate; this is already foreshadowed in the current shortfall, whichwill project into 1958 some expenditures planned for 1957. Apart fromevening olit the economic burden of the public investment program, this willalso help ease the prospectiv- termination of U.S. grants; since the aidamounts included in this program are already explicitly earmarked forGu&temala, they will presumably not be lost or diverted to another countrybut merely expended over a longer period.

h9. A more serious obstacle than financial capacity to the effectiveexecution of the proposed program is the shortage of administrative andtechnical personnel, and to some extent of skilled labor. The Council'sreport noted these deficiencies, and the need for measures explicitlydesigned to mitigate them. Specifically in the highway construction pro-gram, which consitutes by far the largest category of proposed investment,especially in the first years, the Government is reducing its technicaland administrative burdens by letting competitive contracts (mostly toforeign firms) for all major projects, instead of continuing the previousAdministration's policy of doing all such work on force account. Manyother public works projects are also being contracted out. The Government

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is obtaining intensive technical assistance in a variety of fields -highway planning, censtruction and maintenance, rural resettlement,supervised agricultural credit, public administration, general economicprogramming, etc. The Central American Technological Institute, recentlyestablished in Guatemala City under United Nations auspices, offers con-sulting services on a wide range of technical problems, especially inindustry.

50. Guatemala's prospects for economic growth are closely intertwinedwith the prospects for its export prduction and balance of payments. Irrecent years coffee has accounted for some 70$ of the value of exports.Hence the likelihood of a decline in world prices is of great importance,although the fall in price may be less for Guatemalats mild varieties thanfor the Brazilian or African grades; moreover there should be a partlycompensating increase in the volume of production. A much greaterproportional increase should take place in exports of cther agriculturalcommodities, timber and its products, and minerals. While large-scaleprcducticn of petroleum is unlikely to develop witain the next four years,expenditures for exploration already constitute en appreciable credit item.Tourist revenues will certainly increase. Cn balance, it seems notunreasonable to look forward by 1960 to annual receipts from these varioussources of perhaps Q 140 million, which would be 29, above the level of1955; the difference might consist roughly of the following (in millionsof quetzales): coffee - 5, bananas + 10, other agricultural products + 10,timber and timber products + 3, minerals + 3, other products (includinghandicrafts) + 2, tourism (net) + 9; total + 32. A greater increase insome of these categories appears quite possible, but so is a greater declinein coffee receipts.

Creditworthiness

51. The service of Guatemala's present external debt requires onlya little over $2 million per year,/ about 25. of current exports. As out-lined above, the prospects for expansion of producticn and exports seemgenerally favorable. Budgetary receipts are rising and internal bondeddebt is being amortized at the rate of about Q 3 million per year, permittingits redemption weli before n,aturity. The country could safely assumeadditional foreign debt for sound productive projects.

/ This amount does not include any payments on the cancell balance ofGuatemalan sterling bonds (see above, paragraph 42). Assuming thatservice on this disputed obligation were resumed on a basis similarto debt settlements made by other Latin American countries, it wouldincrease the burden of service payments by a negligible amount.

- 16 _APPENDIX

THE NATIOUAIA CCO:igIIC PL"':ELG COUNCIL?ND THE FIVE-Y_R DEVZL7O1-_'T ?NGROA14

1. In November 1954, at the sugg.estion of the Bank IMission thenvisiting Guatemala and in line with an earlier recommendation made by theBrItnell Mission in 1951, the Guatemalan Government set up a NationalEconomic Planning Council of 10 maembers (7 ex oficio and 3 direct appointeesof the President) to "orient, project and coordinate...the nationaleconomic development;" to study necessary measures for immediatestimulation of economic activity; to prepare a basic economic developmentprogram for the next five years (the period of office of the presentA.dministration); to study the administrative, fiscal and other measuresrequired for this purpose; to study and coordinate relevant programsand projects of the various Government agencies, and private investmentprojects which involve a Government guarentee; to review technicalassistance programs; and generally to advise on matters of economicpolicy. The Council has a full-tire Secretary Generel heading a smalltechnical staff.

2. Tile Council prepared, and the Government adopted as the basisof its economic policy and planning, a public investment progran forthe five years 1955/56 - 1959/60 (Table 18). The Council's report -ashedged about with various qualificPtions, and it emphasized the need foradditiona-l studies, for further refinement of its estimates arl suggestedalloca.tion of resources, for a number of legal and institutional measures,for strengthening of the Government's technical and administrativecapacity, and for continuous review of the program in the light of changingcircunstances. Nevertheless, it provides a useful general guide toGovernment policy and investment priorities, and means of informing thepublic, potential investors, and even members of the Government itselfas to the prospects and plans for Guateralan economic development.

Underlying Assumptions

3. The basic premise underlying the Council's analysis andrecommendations was that "it considers the promotion of private initiativeand investments as th-e principal forces for economic development," andthat the Government's role is primarily "to ensure a favorableenvironment and offer stable bases for the private activity." Itsreport undertook to oroject what level of gross investment mightreasonably be possible, without undue strain, during the five-year period -taking account of the structure of the national economy, the finencialhabits and attitudes of its people, its fiscal and balance of paymentsprospects, the probable availability of foreign aid and lomns and otherrelevant factors - and within this total investment capacity to estimatewhat proportion should be channelled through public entities, taking"special care to leave an adequate margin of resources for the requirementsof the private sector3"

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4. The Council's analysis suggested that during thefive-year period under study -

(a) "The rise in the general level of internal prices willremain within acceptable limits and inflationary pressures canbe reduced by an effective and flexible monetary policy...'1 In thebalance of payments projections an allowance 1uas made for consurLerimports to inrrease by a greater percentage than total consumption,to serve as a brake on orice increases.

(b) GuatEmalats terns of trade will worsen somewhat, in view ofthe orospect of a decline in coffee prices greater than that for itsimports.

(c) Gross National Product may be ex-:pected to increase by anaverage of 5% per year, the probable worsening of terms of trade beingoffset, at least in part, by the extraordinary initial stimulus providedby foreign grants and loans.

(d) Domestic savings will raintain roughly the same percentagerelation to GAP as in 1953 (i.e., 12.5-13%) mnd will be supplenentedby external grants, loans and investments avereging nearly Q20 millionper year (about 3% of GiNP) but accruing principally in the first threeyears of the program. The latter assumption took account of U.S. aidcommitments through fiscal year 1955/56, anounting to slightly over$l0 million; an additional '15 million was subsequently appropriatedfor 1956/57.

(e) Guatemala's internati3nal reserves will Drobably continueto rise through 1958 and decline thereafter, and "the initialaccumulation of reserves should be utilized to offset inflationarypressures through admission of greater imports of corsumer goods incases where the national production is insufficient to satisfy theaenand, taking care to maintain an ade,4urte margin to meet thesubsequent deficit in the balance of payments."

(f) Guatemala's exp^rt prospects for the short tern are moderatelyoptimistic. The likely decline in coffee prices will be offset in partby an increase ir. volume of exports; and more substantial increases mabe expected in e:ports of other agricultural products (bananas, oilseeds,fibers, extracts, etc.), timber and minerals. Tourist receipts alsoshould rise considerably. Petroleum production on any substantial scalecannot be expected within such a short period, but expenditures forexploration should be an appreciable factor in the credit side of thebalance.

(g) The value of imports will rise by an estimated 45% from1955 to 1960, with imports of fuels and lubricants nearly doublingand those of capital goods holding fairly steady in the years 1956-60at a level about 30p above the 1955 figure.

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(h) National Government revenues will rise to alevel in 1956/60 32$ above that of 1954/5 5 (excluding the special"Liberation taxes"), maintaining a relation of 12-12.5> to GNP.It took account of some probable changes in the tax structure,principaLly the introduction of a personal income tax.

Size and Composition of the Program

5. Cn the basis of these expectations, and projections ofbalance of payments ana public finances through 1959/60, the Councilconcludes that gross investment in Guatemala during the five-yearperiod might be expected to exceed Q 5ho million (expressed in con-stant prices at the 1953 level), of which approximately Q 250 millioncould be available for investments of a public character. (This"public" category includes nearly Q 28 miLlion for power projects,some of which may be financed by private capital, as well as Q 20million for additional capitalization for the Government developmentinstitutions, most of which sum is intended to be channelled throughlong-term loans into the private sector.)

6. The Q 250 million public investment program corresponds,in concept but not in detail, to the "optimum investment program" ofQ 180 milliGn for six years, suggested by the Bank's Survey (Britnell)Mission of 1950/51 - made up of Q 102 million of "normal" investment,Q 60 million of incremental investments, excluding debt service, andQ 18 million of U.S. grants expected for the Inter-Anierican Highway.The indicated ave age annual level of public investment in the presentprogram would thercfore be 67% higher than that suggested by theBritnell Mission; but the two programs, and the considerations onwnich they are based, are not wholly comparable. Some of the pointsof difference, and the reasons therefor, nay be summarized as follows:

(a) The Britnell Mission program was proposed to coverthe period 1951/52 through 1956/57, with its costrising progressively from about Q 24 million toQ 33 million per year. Public investments did infact begin + rise sharply after 1951, and by 1953/54were about at. the level (although not allocated to thespecific purposes) suggested by the Survey Mission.It seems a reasonable assumption that after the tem-porary setback caused by the 1954 change in government,and in view of the economic expansion which that changeaccelerated, the level of public investment would re-sume its upward trend. A simple projection of the

- 19 -

--itnell Mission estimates through 1959/60 wouldyield a five-year total of Q 175 million toQ 180 million, for an annual rate nearly 20g abovethe Lverage of the original pro'gram.

(b) In fact, the economy did expand substantially inmonetary terms, although much less in real product,between 1950 and 1955. Gross National Product roseby an estimated 26'Z, exports by 35X, .noney supplyby about 50$, and total govermnent revenues by 63%.

(c) The most important single factor strengtheningGuatemala's short-term capacity for public invest-ment is the extraordinary financial aid it isreceiving from the 'Jnitcd States. The Lritnellreport included only $18 million of such assistance;the present five-year program assumed over $40million, on the basis of commitments as of the endof 1955, and subsequently a further ,15 millionwas appropriated for 1956/57.

(d) All t;iese circumstances have strengthened the Govern-ment's capacity to bcrrow internally and externally.The "optimum investment program" of 1951 assumedtotal borrowings of about Q 20 million; the Freserxtfive-year program considers external borrowing upto $50 million for productive purposes would not beunreasonable - although the use of foreign creditsto that extent would not be necessary if the Coun-cil's projections are realized in other respects.

7. Of the proposed Q 250 million public investment, Q 56.7million was projected for the first yenr (1955/56), rising toQ 62.3 million in 1956/57 and thereafter declining to about Q 40 millionin the last two years. The bulge in the first half of tho periodresults from the fact that external grants are concentrated in theseyears, adding Q 15-20 million annually to Guatemala's own public in-vestment resources in the years 1955/56 through 1957/58.

8. The public investment program is heavily weighted towardroad building, which accounts for over half the five-year total and a

- 20 -

much larger proportion in tne lirst three years. Trhis emphasLs reflectsboth the great importance assigned to imoroving Guatemala's veryinadequate highway network end the great cost of building modern roadsin the Guatemalan terrain. It is also influenced by the concentrationof most of the U.S. aid funds on highway projects, and the fact thatbecause of the work of the Bureau of Public Roads and the Government'sown highiway consultants, cost estimates for road construction weremore complete and readily available. The rmost recent thinking of thePlanning Council and the Ministry of Communications is to reduce thehighway investment somewhat, by substituting relatively low-costimprovements to existing roads for expensive naw construction in somecases. This seems to be a sound approach, but the arount of overallsavings that crn thus be achieved is limit'ed by the cost of the threemajor projects (the Inter- American, Atlantic and pacific Highways)to which Guatem,ala is already commi-ted. Moreover, it will not be possibleor desirable to cut back highway construction all at once, by 70% ormore in l958 when these three projects are all scheduled for completion.It seems desireble to include at least one more major project, probablythe link from Guatemala City north to Coban, El Estor and the Peten,in the progran for 1950-60.

9. Some other adjustments in the balance of the progran appeardesirable. -Plans for hospital construction are probably over-ambitious,and might well be scaled down in favor of less elaborate clinics andpreventive work. On the other hand, the amounts tentatively allocatedfor some other categories - for example, transportation other thanhighways, electric power, some phases of agricultural development,water and drainage works, and miscellaneous projects - should probablybe increased to some extent. one of the most important continuingfunctions of the Planning Council will be to adjust the balance, aswell as the overall magnitude, of the prograa in the light of newinformation as to development needs, resources and costs.

10. The Councilts report makes no attempt to project how the nearlyQ300 million assumed to be available for private investment wvuld beallocated, since this wrill be determined by private initiative.

The First Year of Execution

11. The actual level of public investments in the first year wassomething over Q40 million, more than 25% below the Q56.7 millionprogrL.nmed. This lag resulted from initial organizational and administratiproblems, the time required to recruit technical personnel and letcontracts, delays in the comitment of U.3. aid funds (most of whichbecrme available onlr after five months of the fiscal year had passed),and an abnormally short and wet construction season. Almost all the

_ 21 -

highway projects are now under contract, however, with fairly firmschedules, and most of the lag in this field is likely to be recoupedbefore the end of fiscal year 1957-58.

12. The 1955 GNP estimates suggest, moreover, that total investment(at 1953 prices) was almost precisely at the level of ZU57W projectedin the Council's report, with private capital compensating iLr thelag in public investment.

13. The Planning Council has made an important contribution to theproper orientation of Guatemala's economic development, but its performanceas a coordinating agency still falls considerably short of the ideal.Pertly this results from inadequate understanding and acceptance of itsfunction within the Government, partly from the difficulty of staffingthe Secretariat adequately. The recent apoointment of the former Secretaryof the President as Secretary-General of the Council should help toimprove coordination, especially with the Presidency of the Republic;znd the staffing problem is being partially resolved by employment ofseveral foreign technicians, directly by the Government or through thefirm of Klein and Saks under the ICA technical assistance program.

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TABLE 1

Gross NationaL Product or Expenditure, 1948-1955 (Q million)

At Current PricesConsumption Current Government Public Private Net

year Total Expenditure Expenditures Investment Investment Investment Abroad

1948 423.2 349.5 30.0 114.1 36.6 - 7.01949 422.6 356.9 30.6 19.2 25.9 -10.01950 1466.4 369.9 53.2 2.7 37.14 3.1951 496.6 395.3 L'1.9 15.4 42.4 1.61952 533.8 405.9 57.5 22.3 30.9 17.21953 534.3 408.3 53.7 29.3 38.7 I(.31954 547.0 431.1 59.5 18.4 40.1 -2.11955 579.0 444.0 57.6 35.2 47.5 -5.3

At 1953 Prices

1948 486.4 421.1 33.7 11.1 28.5 4.01949 469.6 401.0 33.7 19.6 26.3 -11.01950 485.8 3bb.3 51.7 2.9 39.7 3.21951 491.7 399.3 41.6 13.1 36.1 i.61952 533.8 41i4 .8 57.2 18.7 25.9 17.21953 534.3 408.3 53.7 29.3 38.7 4.31954 521.0 10o.6 57.2 17.3 37.9 -2.01955 567.6 1428.5 59.0 36.2 4B.8 -4-9

Notes Becaise of the inadequacy of price data, the estimates of investment expenditures at 1953 pricesare believed to be unreliable.

Source: Banco de Guatemala for 1948-54; 1955 estimated on basis of data from Statistical Office and Bancode Guatemala

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TABrE 2

Per Capita G.N.P., 1948-1955

Year Per Capita C.N.P.

At Current Prices At 1953 Prices

Q Q

19483 160.0 183.9

i949 155.2 172.4

1950 1b6.4 173.3

1951 172.1 17o.4

1952 179.4 179.4

1953 175.3 175.3

1954 173.7 167.0

1955 179.5 176.0

Source: Banco de Guatemala, except 1955 estimated on basis of datafrom Banco de Guatemala.

TABLE 3

Agricultursl Production, 1947-48 to 1955-56

(Thousand quintals 1/)

1947-148 ±950-51 1952->3 1953-54 1954-55 1955-56(Forecast

Mainly for Domestic Use

corn 11,811 11,643 9,408 10,500 7,99i 10,074Ricc 197 172 214 290 212 2149Beans n.a. 533 578 n.a. 512 638k.heat 295 437 485 n.a. 1400 498Sugar 590 524 797 890 967 n.a.Cotton (zinned) 39 45 62 80 195 225

MKainly for Export

Coffee 1,103 1,178 1,267 1,364 1,320 1,4ooLananas 6,305 3,1483 2,068 3,696 3,325 3,234Essential Oils 2/ 3 10 15 12 9 9Chicle 2/ 149 14 23 -- 25 20

y One Spanish quintaL: equals 100 Spanish lbs. or 101.43 Ehglish lbs.

2/ Export figures for calendar year preceding crop year - 1955-56,estimate oased on the Jan.-Sept.- figures.

Source: Statistical Office, Ministry of Agriculture, ama export statistics.

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TABLE 4

Government Receipts and Expenditures 1948-49 to 1955-56(C millions)

Total Budgetary Assigned Surplus (f) orFiscal Year 1/ Expenditures 2/ Receipts Revenue 3/ Borrowings 4/ Deficit (-) 5/

1948/49 49.1 44.5 u.6 2.0 - 4.0

1949/50 55.0 42.8 1.0 7.2 -11.2

1950/51 48.1 47.4 1.1 1.1 , v.4

1951/52 54.1 57.4 1.0 1.6 f 4.3

1952/53 68.2 61.5 2.7 1.2 - 4.0

1953/54 82.5 65.6 5.5 17.3 -11.4

1954/55 74.8 76.2 / 3.7 14.6 / 5.1

1955/56 83.7 71 77.4 5.7 8/ 6.8 o 0.6

1/ Fiscal year ending June 30

2/ Cash expenditures (except for June 1954) on ordinary budget account plus disbursements of borrowed fundsexcludes the counterpart of grant assistance.

3/ Assigned to various sinking funds

4/ Gross borrowings, excluding seasonal short-term borrowings repaid in sane fiscal year

5/ Budgetary receipts plus assigned revenues minus expenditures; does not include change in deposits ofGovernment agencies other than MinisLry of Finance

6/ Includes Q6.2 million from liberation tax

7/ Does not include carry-over surplus

8/ Does not include Q2 million capitalization Banco del Agro.

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TABLE5

Government Revenues, 1948 -9 to 1955!-56Gorernnenti.Llir.

Total Total Import Exoort. Liquor and Stamp Business Other Non-taxFiscal Year Revenue 1/ Tax Receipts Duties Taxes Tobacco Taxes Taxes Profits Tax Taxes iheceipts

1946_49 44.5 33.3 14.4 3.2 8.9 2.3 3.6 1.8 11o2

1949-50 42.8 35.1 15.7 2.0 9.0 2.4 3.9 2,0 7.7

1950-51 47.4 41.0 17.6 5.7 9.3 2.7 3.5 2.3 6.4

1951-52 57.4 49.6 19.5 9.7 11.0 3.1 3.7 2.6 7.8

1952-53 61.5 52.8 23.1 10.8 11.2 3.5 4.0 3.3 8.7

1953-54 65.6 55.5 20.8 10.9 12.3 4.3 3.8 3.3 10.1

1954-55 76.2 61.4 21.4 14.7 10.9 4.1 5.2 5.1 14.7

1955-56 77.4 66.3 22.0 2/ 13.9 12.8 5.4 5.6 6.6 11.1 /

1/ Excluding "assigned revenues" allocated to sinking funds

2/ Unaudited figures. May require adjustment between these two.

Sources Banco de Guatemala, Statistical Bulletin

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TAM 6

Internal Debt, 1954/195 and 1956( million)

June 30 December 31 June 30 December 30 June 301954 1954 1955 1955 1956

Ventral Goverment

Flo ating Debt 9.6 5.4 4.7 3. 6 14.0 o

Loans from Banks 3. 8 3.1 2.2 0.8 0.3

Funded Debt iJ 18.2 17.5 18.9 23.0 23.4

Short-Tenm Treasury, Notes - 6.1 - - -

Other Current Cblications 1.8 1.8 1.8 1.8 3.7

TOTAL CENITRAL G0'V1U-ENT 33.4 47.9 27.6 29.2 41.4

Municipalities

Loans from Bank 0.° 0.9 0.9 0.9 0.9

Funded Debt 4.6 4.4 4.2 4.2 4.6

TCTAL iUNICUALITIET 5.5 5.3 5.1 5.1 5.5

GR&ID TOTAL 38.9 53.2 32.7 34.3 46.9

/ Including only those "Agrarian Bonds" held by the public

/ Includes Q8 million of undischarged Govermnent debt, presented within thisoeriod for the first time

Source: Banco de Guatemala and I.M.F. Mission

- 28 -

TABLE 7

Money SuPply and C.J and Foreign Exchange Reserves, 1949-1955- (Q million)

End oft Currency Demnd Dposit Money Supply Net Gold and Foreign Ratio of Moneyof Public Exchanme R.servcs Supply to Reserves

199 37.5 19.8 57.3 38.1 66

1950 38.8 23.1 61.9 39.4 64

1951 40.2 24.o 64.2 41.9 65

1952 45.4 22.2 67.6 44.0 65

1953 March 47.1 27.9 74.9 55.4 74June 45.1 26.o "§.l 53.4 75September 44.8 25.0 6o.8 39.2 56December 53.2 26.8 80.0 42.4 53

195)4 March 54.6 34.9 89.4 53.6 60June 55.2 25.8 81.0 43.5 54September 52.4 26.8 79.2 38.5 49December 54.0 28.1 82.1 39.7 48

1955 March 51.1 28.6 79.7 49.1 62June 49.3 34.7 84.0 57.3 68September 48.9 34.6 83.5 49.8 60December 52.0 40.4 92.4 54.7 59

1956 March 54.4 43.9 98.3 68.7 70June 53.4 47,2 100.6 72.4 72September 54.0 44.1 98.2 58.8 60

Source: Banco de Guatemala

- 29 -

TABLE 8

Balance Sheet of Banco de Guatemala(Q millions)

June 30 September 30 June 30 September 30 June 30 September 30 December 31 March 31 June 301953 J.953 1954 1954 1955 1955 1955 1956 1956

Assets

Gold and Foreign Exchange 51.9 33.7 43.7 37.8 56.5 49.4 54.3 70.0 73.1Reservess

Gold 27.2 27.2 27.2 27.2 27.2 27.2 27.2 27,2 27.2Foreign Exchange 24.6 11.4 16.5 10.6 29.3 22.2 27.1 42.d 45.9

Rediscounts and Advances toBanks 7.5 11.6 13.0 9.8 5.8 7.3 11.7 6.9 3.2

Investments 8.2 19.5 20.6 29.4 21.0 27.3 25.2 23.0 19.4

Other Assets 1/ 2.5 2.7 8.3 9.7 7.7 7.9 o.0 10.4 9.0

Liabilities

Currency and Coin Issue 47.0 47.3 57.8 55.1 52.4 51.9 54.9 57.7 56.3

Depositss Total 17.3 16.6 16.8 20.0 26.8 27.2 30.3 32.1 31.2Banks 12.2 10.3 13.5 12.1 17.4 15.4 20.3 22.0 22.3Government and

Uther Official 3.9 4.7 3.1 6.4 8.8 9.9 7.9 8.3 7.1Other 1.2 1.6 0.2 1.5 1.2 1.8 2.1 1.8 1.8

Letter of Credit Outstanding 0.4 1.3 0.9 0.2 1.1 1.1 0.9 3.3 1.6

Other Liabilities 2/ U.3 0.6 0.7 0.9 0.7 1.2 1.5 0.9 2.6

Capital and Reserves 2.4 2.4 3.0 3.0 4.0 4.0 4.0 5.1 5.1

1/ In-luding investments of sinking funds

2/ Mostly unoistributed profits

_ 30 -

TABLE 9

BANKING STATISTICS, JU1E 30, 1956(Q Tnousands)

Demand Time & Saving Paid up Capital Rediscounts & Cash & Due Loans & Investments

Deposits Deposits anm Reserves Advances from from other Discounts____________ ______________ Central Bank Banks

Private Banks

Bank of London & S.A. 17 199 -- 763 ___ 13 538 3 993 --

Banco Agrioo]. Morcantil 12 M97 135 2 501 122 5 692 7 579 2 197Banco de Occidente 2 145 639 1 362 902 1 lO 3 999 ---Banco Popular 1 172 190 400 --- 439 1 112 ---

Government Banks

National Mortgage Bank 7 060 2 357 5 071 1/ 415 4 351 19 523 129

INOP 1 062 1836 1480 B 792 2 385 6 165 3 665

National Agrarian Baik 327 _10 130 1 000 481 7 200 318

1/ In audition, bonds of q 6615 outstanding

2/ In addition, bonds of Q 1870 Outstanding

3/ Mostly in IFOP'S own enterprises

Source s Balance sheets of institutions

- 31 -

TABLE 10

Goverment Flnancial Institutionst( Thousands-

National Mortgage Bank JIFOP

Loans Deposits Bonds Loans Investment D BondsMm-and TLne and Outstanding in own Demand Time Outstend

Savings enterprises Savings ingEnd ofs

December 1950 15,740 3,908 1,350 3,046 2,691 1,726 338 339

1951 16,782 3,620 1,1452 2,546 4,079 2,344 461 360

1952 17,121 3,248 1,238 2,599 3,899 3,395 269 383

1953 20,297 4,039 1,578 5,021 4,087 5,311 800 510

1954 22,460 4,599 1,542 6,463 8,197 4,976 782 825 1,789

1955 19,514 6,334 1,940 6,682 7,168 3,y97 1,172 1,172 1,8148

June 1956 19,523 7,060 2,351 6,615 6,165 3,665 1,062 1,36 1,870

Souroes Balance sheets of institutions

- 32 -

TABLE U

Price Movemnents, 1948 - 1955

(1948 - 100)

Wholesale PricesAnnual Average Consumer Prices Retail Domestic ptpd

Guatemala City Prices Prod_u_cts Goods 4/

1948 100 100 100 1001949 107 11o 103 931950 115 113 110 891951 120 125 116 961952 117 118 115 931953 121 121 115 941954 125 133 120 1031955 126 135 118 90

1955 July 133 147 126 90August 135 140 123 89September 126 134 117 90October 123 132 118 90November 124 131 119 90December 127 130 116 88

1956 January 129 130 118 90February 126 128 115 91March 126 130 114 92April 130 130 118 92May 130 - 118 93June 134 - 118 90July 129 - 118 91August 125 _ 115 91

/ 46 articles "of prime necessitye in Guatemala City

/ 15 articles in Guatemala City and other local markets

/ 62 articles

v 9 articles

Source: Stai4.atical Office and Inter.national Financial Statistics.

TABIE 12

Balance of Payments 1950-l955(Q mt1lions) ~

Current A'counts 1950 1951 1952 1953 1954 1955

Merchandise:

Exports, f.o.b. adjusted 78.9 84.3 94.7 97.8 104.8 106.3Imports, f.o.b. adjusted -64.1 -75.6 _69.7 _72.2 _B2.4 _93.3Balance / 514. f5. /-7:U f135

Services (net)3

Transportation - 6.5 -7.8 - 6.6 -i.7 -9.5 -11.2Travel & Tourism / .U7 - 0.6 - -0.8 f 2.3Insurance - 1.4 -1.1 - 1.5 -1.0 -1.3 _ 1,1Government Services 0.5 /0.5 f 0.6 /0.6 -0.1 0.1other Services - 0.8 -(3.7 - 1.6 -4.8 -3.5 - 2.1Dividendsand Interest - 4.0 f 2.1 f 2.0 -9.1 -9.3 6.2Remittances f 0.9 /0.3 0.8 -. 1 -BaLance _lV.7- 'Z7. __Y.T -Z -Z7i -18.3Current Account Balance / 4.1 A1.9 f16.8 f 2.5 _ 2.2 - 5.3Donations

9.6Capital rkcount (not)

Private long-tenm / 4.8 /2.7 f 1.5 o.l f 4.0 3.9Private short-term - 1.3 /2.3 -14.3 / 0.2 - 3.0 f 9.8Officianl and Banking - 0.1 -.L3 - - - f 1.0(long-term)Officlk.al & Banking (short- / 0.0 f0.2 - - 2.0 / 1.3 f 1.0term)Change in reserves (4n- - 1.3 -2.5 - 2.1 f 1.7 / 2.7 -1s.1crease / decrease)

Tota. Capital Movement 2.3 2..3 -14.8 - 0.2 0 A- o.sErrors & Omissions - 6.4 - 4.2 - 2.0 - 4.0 - 2.8 - 4.8Source: Banco de Guatemala

-34-

TABLL 13

Composition of Exports 19hc-1955

-- millions)

1946 S 1949 % 1950 % 1951 ,; 1952 % 1953 $ 1954 % 1955 %

;xports, f.o.b. 1/ 50.2 100 52.2 100 67.6 100 76.1 100 87.5 100 8d.9 100 95.7 100 9d.7 100

Coffee 30.7 61 3l.4 72 52.8 78 5i.5 77 71.6 82 6b.2 77 75.6 78 75.2 77.5Bananas 10.3 21 7.4 14 7.6 11 6.0 8 4.7 5 12.6 14 1. 2 12 9.4 10.0Chicle 2.1 6 1.8 3 1.3 2 2.0 3 1.7 2 - - u.4 ?/ 1.4 1Dumber 0.5 1 0.2 2/ 0.2 2/ U.6 1 0.8 1 0.6 1 044 2/ U.5 u.5Essential oils 0.8 2 1.0 7 1.4 7 2.2 3 1.3 1 0.8 1 U 3 I 1.1 1Other exports >.0 10 4.1 8 4.3 6 6.7 9 7.5 8 6.7 8 d.7 9 10.9 U

1/ Banana exports unaervalued

2/ Less than U.5,,

Source: Statistical Office and Banco de Guatemala

- 35 -

TAB3L 14

Compositioni of Imports, 1950-1955._4 (Q Milliolls)

1950 % 1951 ' 1952 % 1953 % ±954 % 1955 %

Imports c.i.f. 71.2 80.8 75.7 79.5 86.3 1D4.3Freight, FIsurance, Commissions, etc. 7.5 8.4 8.4 9.3 9.4 12.4

63.7 100 702 100 67 33 Ir 7049 v i 76 85 91 IC?Livert animal 0.3 2/ ':~ 60:3 l 0O, 0 .5~ 20¶

Foodstuffs and Beverages 7.9 12 9.3 13 10.2 15 8.6 12 10.5 14 14.3 16Dalry Products 1.2 2 1.4 2 1.0 1 j1.4 2 1.4 2 1.8 2Lard 0.8 1 1.4 2 1.1 2 0.9 1 1.9 2 1.7 2Wheat flour 2.1 3 2.6 4 2.6 4 2.5 4 3.3 4 3.4 4Sugar ii 2/ 0.1 2/ 1.9 3 1/ 2/ 1/ 4 1/ 2/Liquor 0.5 1 0.4 T 0.4 1 .4 I 0.3 4/ F.i

Raw Materials 8.3 13 8.7 12 8.0 12 8.5 12 9.4 12 10.7 12Crude and Diesel Oil 2.2 3 2.4 3 2.0 3 2.3 3 2.5 3 3.0 3Gasoline aid Kerosene 2.1 3 2.5 3 2.7 4 3.1 4 3.1 4 3.7 4Lubricating oil 0.3 2/ 0.5 1 0.3 2/ 0.4 1 0.5 1 0.5 1Fertilizers o.4 -1 0.9 1 0.9 I 0.9 1 1.1 1 1.1 1Cotton 1.2 2 o.6 1 0.1 2/1 2/ 1/ 2/ 1/ 2/

Manufactured Articles 147.2 74 54.0 75 48.5 73 52.6 75 56.2 73 66.3 72Cosmetics 0.5 1 0.6 1 U.6 1 0.4 1 0.5 1 0.Y 1paints and Varnishes o.4 1 0.5 1 0.14 1 0.5 1 u.6 1 0.9 1Drugs and Vitamins 1.9 3 2.1 3 2.6 4 1.5 2 1.7 2 1.8 2Fungicides and Insecticides 1.1 2 2.1 3 2.5 4 1.6 2 2.1 3 2.2 3Yarns,' Textiles & Wearing Apparel 13.0 20 13.5 19 12.8 19 12.6 18 l.5 24 17.4 18Rubber Products 1.1 2 1.5 2 1.3 2 1.4 2 1.6 2 1.6 2paper and Paper Products 1.8 3 2.5 3 2.6 4 2.3 3 2.9 4 2.7 3Glass and Chinaware 1.2 2 1.5 2 1.2 2 0.9 1 1.1 1 1.0 1Iron and Steel Products 4.9 d 5.6 8 4.6 7 5.2 7 5.0 6 6.6 7Transpt. Equpt. incl. Motor Vehicles 7.9 12 8.6 12 6.7 10 7.7 11 7.7 10 11.7 12Elect. Machinery & Equipnent 2.2 3 2.4 3 1.9 3 2.2 3 2.4 3 3.3 4Mechanical Equipment 4.5 7 5.4 7 4.7 7 5.6 7 5.0 8 7.3 8Other Machinery & Equipment 2.0 3 2.4 3 2.0 3 1.9 2 1.0 1 1.1 1Clcks and Watches o.4 1 0.4 1 0.3 2/ 0.3 2/ 0.4 1 u.4 2/

Art Objects, Gold end Silver 0.1 V 1/ 2/ 0.1 7/ 0.1 7/ / 21 1/ Y

1/ Less than Q 56,000 2/ Less than 0.5%

Source: Statistical O. ice rnd Banco de Guatemala

-36-TABLE 15

Direction of Foreign Trade(Q millions)

1948 % 1949 % 1950 % 1951 % 1952 % 1953 % 1954 % 1955 %

Exports, f.o.b. 1 50.2 100 52.2 100 67.6 100 76.1 100 87.5 100 68.9 100 95.7 100 98.7 100

United States 44.6 89 47.8 92 60.2 89 66.7 88 72.8 83 68.1 77 67.8 71 73.1 74Canada 2.0 4 1.4 3 1.2 2 1.9 2 0.8 1 1.8 2 2.3 2 2.1 2United Kingdom 0.7 1 2 2/ 2/ 1.5 2 2/ 0.7 1 o.6 1Latin America U.9 2 0.4 1 0.5 1 0.9 1 2.2 3 27.1 2 2.0 2 2.4 2Western Europe 1.9 4 2.6 5 5.5 8 6.3 8 10.1 12 16.7 19 22.6 24 19.4 20Eastem Europe - 2/ 3/ 0.1 3/ 0.1 3/ 2/ I/ - - 2/ 3/ - -Other Countries 2 3/ Y/ 3/ 2/ 3/ 0.1 7/ - - 0.2 3/ U-3 3/ 1.1 1

Imports, C.i.f. 68.3 100 68.0 100 71.2 100 bO.8 100 75.7 100 79.5 100 86.3 100 104.3 100

United States 52.1 76 50.0 74 46.8 69 54.3 67 47.6 63 51.3 64 55.6 65 66.9 64Canada 1.5 2 1.5 2 2.3 3 2.7 3 2.2 3 2.1 3 2.3 3 2.9 3United Kingdom 1.9 3 1.6 2 2.3 3 3.2 4 4.1 5 3.3 4 3.4 4 4.0 4Latin America 9.0 13 9.3 14 10.1 14 7.6 9 11.1 15 10.9 14 10.5 12 14.7 14Western Europe 2.9 4 4.4 6 6.2 9 9.7 12 9.2 12 10.2 13 12.7 15 14.3 14Eastern Europe 0.5 1 0.5 1 0.6 1 1.0 1 o.6 1 0.9 1 1.0 1 0.2 3/overseas Sterling 0.4 1 0.4 1 0.6 1 0.7 1 0.4 1 0.4 1 0.3 / 0.6 '

AreaOther Countries 0.1 U 0.2 3/ 0.3 21 1.7 2 0.4 1 0.3 o 0.4 2 0.7 1

1/ Banana exports unrLervaluedT/ Less than Q 50,0003/ Less than 0.5%

Source: Banco de Guatemala - Statistical Bulletin

-37-TABLE 16

Coffee Ecports, 1948-49 to 1954-55

Crop Year Quant4 Value, fob. o(100 quintals) (Q 1000) -(Q)

19L48-49 1196.7 36,145.8 30.25

19419-50 114 6 .2 46,419.7 4o.5o

1950-51 1096.3 58,309.5 53.19

1951-52 1313.8 70,985.5 54.03

1952-53 1243.8 67,938.4 54.62

1°53-54 12145.2 79,860.8 64.13

1954-55 1161.4 68,265.7 58.78

1955-56 1173 75,818. 64.72

iources Statistical Office

-38 -

TA-OM 17

i-ricas of iripcrts and xport,s, and Tens of T rade, 194s5 to 1955(JS5 * JUUJ )

.jLnual4ivcraser Exoort Prices Import ?rices 3/enrs of Trade X

19J8 66.7 loo.6 66.31949 71.° 97.3 73.01C,0 100.0 100.0 100.0195:1 117.0 111.1 105.41952 21S.C 1c8.5 106.47 953 1J14.C '.07.3 106.61.° 11 138.1 108.2 127.61955 123.6 103.5 ll.C

1,55s13t quarter 124.G lC,.1 117.92nd qjuarter 118.3 107.° 109.63rd quarter 123.2 106.5 113.54th quarter 125.7 109.6 114.7

#;/' 1950 weights

3/ -ased on U.S. wholesale price series3 weijhts patterned onGua.temalan Imoorts.

2/ sixpcrt prices by import prices

Sources 'Banco de 4;uateauala.

-'9-

TABIE 18

Public Investment Progmn, 1955/56-1959160Q mi 11ions)

5 year % of 1955/6 1956/7 1957/8 1958/9 1959/60Total Total

Fields of Investment

*ighways 129e4 51.6Port Improvements 2.2 0.9Airrields 1.2 0.5Telephone and Telegraoh 6.7 2.7Electric Power 27.8 11.1Agricultural Research and

Demonstration 7,0 2.8Colonization 15.0 6.o.Capitalization of State Banks

and Grain Gomaission 20.0 8.0School Construction 3.5 1.4iater and Drainage 5.0 2.0'!ospitals & Health Centers 10.7 4.2I.z.a..S. Programs 1.3 0.5Housing 4.2 1.7Public Buildings and lUsC. 16.7 6.6

TOTAL 250.7 lC0 % 56.7 62.3 52.8 39.3 39.6

Sources of FinancingExternal

I.s.X.D. 21.3 3D.o.-Bzlr. of PUolic Roads 21e4

U.S.-I.C.^. ~~~19.2 MNIC'EF 0.3

Sub Total 62.2 26 % 30.8 17.5 9.4 4.2 093

iDomestic

Ordinary 5ud-et 117.2Bank of Guatemala (Loans) 15.0Bank of 3uatenala (Puildings) 1.2j.unicipa1ity of Guatemala 14i.0I.C.S.S. 1.3

l1487 59 % 25.9 28.1 30.1 30.8 33.8

Other Soureus V 39.8 15 % - 16.7 13.3 4.3 5.5

iJ The specific sources shown include all those whose availability and application appearedfairly certain when the program was presented early in 1956

#/ Comprising the highway loan already granted and the teleco3umnicationsand I.N.F.O.P. projects under active consideration by the Bank.

2/ Appropriations through FT 1955/56; an additional $15 million has since beenappropriated for 1956/57.

Pousible additional foreign aid, domestic or foreign loans, participation ofprivate capital, etc. not yet determined when the program was presented.

- 40 -

TABLE 19

Summary of External Public Debt.

(in thousands of U. S. dollars equivalent)

U.S. dollar bonds 2,9721/

I.B.R.D. loan 18,200of which, privately placed (576)

disbursed as of October 31, 1956 (6,472)

Total of recognized external debt 21,172

Sterling bonds (status in dispute) 1,196 '

As of December 31, 1955. This boni issue was created to enablelife insurance companies operating in Guatemala to invest theirreserves in Guatemalan securities as required by law, but stillto assure their being able to meet claims arising under theirpolicies denominated in dollars. The total issue is $4400,O0,guaranteed by an equivalent amount of gold deposited with theFederal Reserve Ba.nk of New York.

Principal amount of unredeemed balance.

Source: Contaduria General de la Nacion.