2016 Index of Economic Freedom

Guatemala

overall score61.8
world rank82
Rule of Law

Property Rights20.0

Freedom From Corruption32.0

Limited Government

Government Spending94.3

Fiscal Freedom79.1

Regulatory Efficiency

Business Freedom62.5

Labor Freedom50.9

Monetary Freedom77.9

Open Markets

Trade Freedom86.4

Investment Freedom65.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 15.9 million
  • GDP (PPP):
    • $119.1 billion
    • 4.0% growth
    • 3.5% 5-year compound annual growth
    • $7,503 per capita
  • Unemployment:
    • 2.9%
  • Inflation (CPI):
    • 3.4%
  • FDI Inflow:
    • $1.4 billion
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Guatemala’s progress in advancing economic freedom has been uneven. Openness to global trade is relatively high, but the dynamic gains from trade are largely undercut by lack of progress in improving the investment regime and regulatory efficiency. The lack of a consistent commitment to structural reform is an ongoing problem.

Economic Freedom Snapshot

  • 2016 Economic Freedom Score: 61.8 (up 1.4 points)
  • Economic Freedom Status: Moderately Free
  • Global Ranking: 82nd
  • Regional Ranking: 15th in the South and Central America/Caribbean Region
  • Notable Successes: Trade Freedom and Monetary Freedom
  • Concerns: Property Rights, Corruption, and Labor Freedom
  • Overall Score Change Since 2012: +0.9

Guatemala has lagged notably in promoting the effective rule of law. The judicial system remains vulnerable to political interference, and property rights are not strongly protected. Lingering corruption further undermines overall economic freedom and hampers the emergence of more vibrant private-sector economic activity.

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Background

Former President Otto Pérez Molina, an ex-Army general, won office in 2011 with a tough-on-crime campaign, but his administration was riddled with corruption. In May 2015, his vice president stepped down amid credible allegations that she had links to organized crime. Following Molina’s subsequent resignation and arrest on corruption charges, political newcomer and former television comedian Jimmy Morales won an October 2015 presidential runoff election on an anti-corruption platform that was short on specifics. More than half of the population lives below the national poverty line, and 22 percent of the indigenous population lives in extreme poverty. Nearly one-half of children under five years of age are chronically malnourished. Mexican drug cartels continue to expand their influence in the country.

Rule of LawView Methodology

Property Rights 20.0 Create a Graph using this measurement

Freedom From Corruption 32.0 Create a Graph using this measurement

In 2015, a corruption scandal involving Guatemala’s president led to calls for anti-corruption and governance reforms. Narcotics-related organized crime groups have infiltrated key state institutions. Corruption and mismanagement remain widespread, especially in the customs and tax agencies. The judiciary is troubled by corruption, inefficiency, capacity shortages, and intimidation of judges, prosecutors, and witnesses.

Limited GovernmentView Methodology

The top individual income and corporate tax rates are 31 percent. Other taxes include a value-added tax and a tax on real estate. The overall tax burden equals 13 percent of total domestic income. Government spending amounts to 13.8 percent of total domestic output. The government budget is running a deficit, although public debt remains less than 25 percent of GDP.

Regulatory EfficiencyView Methodology

Despite some progress, the overall regulatory environment is inefficient. Starting a business is time-consuming, and the cost of obtaining necessary licenses equals about five times the average annual income. The labor market is inefficient, and much of the labor force is employed in the informal sector. The state maintains few price controls but subsidizes numerous key economic activities and products.

Open MarketsView Methodology

Guatemala’s average tariff rate is 1.8 percent. Judicial and regulatory inefficiency and corruption discourage foreign investment. The government may not expropriate property without providing compensation. The highly concentrated banking sector remains relatively stable and well capitalized, and the number of non-performing loans is declining. The recently enacted insurance law opened the insurance market to foreign firms.

Country's Score Over Time

Bar Graph of Guatemala  Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Chile77.7-0.8
2The Bahamas70.92.2
3Colombia70.8-0.9
4Saint Lucia70-0.2
5Saint Vincent and the Grenadines68.80.8
6Uruguay 68.80.2
7Barbados68.30.4
8Jamaica 67.5-0.2
9Peru67.4-0.3
10Costa Rica 67.40.2
11Dominica670.9
12El Salvador 65.1-0.6
13Panama 64.80.7
14Trinidad and Tobago62.9-1.2
15Guatemala 61.81.4
16Paraguay 61.50.4
17Dominican Republic610.0
18Nicaragua 58.61.0
19Honduras 57.70.3
20Belize57.40.6
21Brazil56.5-0.1
22Guyana55.4-0.1
23Suriname53.8-0.4
24Haiti51.30.0
25Ecuador48.6-0.6
26Bolivia47.40.6
27Argentina43.8-0.3
28Venezuela 33.7-0.6
29Cuba29.80.2
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