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Many have long believed that Guatemala lacks the traditional mineral resources (coal, iron, and other metals) to establish an industrial economy. Nevertheless, the extraction of petroleum in the Petén since the early 1980s has alleviated some of Guatemala’s power needs and provided additional exports, though the reserves in that region are becoming increasingly depleted. At the beginning of the 21st century, Guatemala had proven deposits of a number of minerals, including nickel, which had once been an export product, but mining in the country was focused on antimony, iron ore, lead, and gold. An increasing number of open-pit mines to extract gold and silver deposits have been established in the western and northeastern regions of the country. The creation of these mines has sparked criticism and protests from neighbouring Indigenous communities and international human rights groups, in some cases necessitating military intervention.
The primary sources of energy are petroleum, hydroelectricity, and fuelwood. Fossil fuels and hydroelectricity both contribute substantially to the country’s electricity requirements. Throughout the more densely populated regions, wooded areas provide firewood and charcoal for cooking, heating, the firing of ceramic ware, and the production of lime. In 1996 Guatemala became part of the System of Electric Interconnection for Central America (Sistema de Interconexion Electrica para America Central; SIEPAC), which connects the region’s power-transmission grids, allowing electricity to be traded between the participating countries. The next year Guatemala began privatizing much of its energy sector.
Manufacturing
Manufacturing grew rapidly between 1960 and 1980 but expanded more slowly thereafter. Guatemala lost markets to Asian manufacturers, particularly in the garment industry. Food processing and beverage production, the processing of tobacco and sugar, publishing, the manufacture of textiles, clothing, cement, tires, construction materials, and pharmaceuticals, and the refining of petroleum are primary industrial activities. Like other Central American countries, Guatemala has encouraged the establishment of maquiladoras, manufacturing plants that primarily assemble garments for export. Most of the workers in these plants are women. Industrial activity is heavily concentrated in the environs of Guatemala City.
Finance
The government-controlled Bank of Guatemala is the note-issuing authority and oversees the country’s banking system. It also handles all international accounts. A number of other public and private banks are in operation, and a stock exchange was established in Guatemala City in 1987. Guatemala’s monetary unit is the quetzal. In 2001 the U.S. dollar was adopted as legal tender along with the quetzal.
Trade
The United States is Guatemala’s primary trading partner in both imports and exports. Other trading partners include Mexico, China, Honduras, El Salvador, Nicaragua, Canada, and Panama. In 1960 Guatemala joined in the founding of the Central American Common Market (CACM), which fostered trade between Central American countries but was only moderately successful in stimulating intra-isthmian trade. CACM suspended its activities in the mid-1980s but renewed its efforts in the 1990s.
By 1993 El Salvador, Guatemala, Honduras, and Nicaragua had ratified a new Central American Free Trade Zone (later signed by Costa Rica) to reduce intraregional trade tariffs gradually over a period of several years, though implementation was subsequently delayed until the realization of SIEPAC in 1996.
In 2004 Guatemala ratified a new Central America Free Trade Agreement with the United States. Implementation of the agreement divided Guatemalans: peasant, labour, and Indigenous groups staunchly opposed it, while businesses and the government believed it would attract more foreign investment and promote economic growth.
Imports include mineral fuels, electrical machinery, transport equipment, pharmaceutical and other chemical products, textiles, and food. The major exports are chemical products and coffee, followed by sugar, bananas, crude petroleum, and cardamom. The exports of vegetables, fresh fruits, cut flowers, and seafoods are of increasing importance.
Services
The growing service sector is the largest contributor to Guatemala’s GNP. Increasing emphasis is being placed upon tourism as a source of income and employment. Noteworthy archaeological ruins are located at Tikal in the Petén, Zacaleu on the outskirts of Huehuetenango, and Quiriguá in the lower Motagua valley. Flores, located on an island in Lake Petén Itzá, is the point of departure for visits to Tikal National Park, which was designated a World Heritage site in 1979. Antigua Guatemala (also made a World Heritage site in 1979), the old colonial capital, has a wealth of ruins and “earthquake baroque” architecture. It has been revived as a tourist and cultural centre with a thriving industry of language schools, museums, bookstores, craft shops, and facilities for visitors. Volcanic landscapes and mountain valleys provide incomparable settings for villages occupied by colourfully attired Indigenous people. Of particular renown is the marketplace in the town of Chichicastenango. The Caribbean coast, where the surf is gentler than on Guatemala’s Pacific shore, is popular with tourists interested in water sports, and Playa de Escobar, near the port of Puerto Barrios, is a favourite destination.
Labour and taxation
Nearly two-fifths of Guatemala’s labour force is engaged in agriculture, with roughly the same proportion employed in the service sector and about one-fifth working in manufacturing and construction. More women entered the labour force in the 1990s, particularly women from poor households. The high rate of urbanization was one of the factors that led to the increase. Although the number of women in the labour force increased by one-fifth by the end of the 20th century, women still constituted less than one-fourth of the official workforce (this figure does not include unreported activities such as subsistence farming and domestic work).
Labour unions and student and peasant organizations made significant progress in the 1944–54 period, but these gains were largely lost in the subsequent period of rigorous military control. Labour union members have been harassed, intimidated, and killed in significant numbers since 1954. Their situation has slowly improved since the 1990s, but many cases of continued abuse have been documented in the early years of the 21st century.
The government continues to rely primarily upon revenue from customs duties. Other tax sources, such as sales taxes, personal income taxes, and excises on liquor and tobacco supplement customs receipts.
Transportation and telecommunications
A network of highways, concentrated in the southern portion of the country, is the major means of transport. The railroad from central Guatemala to the Caribbean ports used to carry more bananas than people, but it has largely been replaced by truck transport for freight and by bus for passengers. Commercial domestic flights within the country are basically limited to those between Guatemala City and the Petén.
Two primary highways extend east-west across Guatemala. The Inter-American Highway, part of the Pan-American Highway, lies to the north of the southern chain of volcanoes. A Pacific coast highway lies to the south. These routes are linked by a number of roads that pass through the chain. The Pacific coastal plain is served by a number of paved highways that extend south from the primary coast highway. The primary north-south highway extends from San José on the Pacific to Puerto Barrios on the Atlantic, by way of Guatemala City. By far a greater number of passengers are carried by bus rather than by private automobiles.
The primary Pacific coast highway and the north-south interoceanic highway are paralleled by the nationally owned railroad. At Zacapa a rail line branches southeast to El Salvador.
Most of the foreign trade is handled through the Caribbean port of Santo Tomás de Castilla. Pacific port facilities (Puerto Quetzal) are in operation at San José.
La Aurora International Airport, located on the southern outskirts of Guatemala City, serves points throughout the Western Hemisphere and Europe. The privately operated national airline is Aviateca.
Guatemala is Central America’s largest telecommunications market. Because of the country’s inadequate fixed-line infrastructure, especially in rural areas, mobile phones have been the fastest growing sector. The telecommunications industry was liberalized in 1996.
Government and society
Constitutional framework
The constitution adopted in 1986 defines the country as a sovereign democratic republic and divides power among three governmental branches: legislative, executive, and judicial. Legislative power is delegated to a unicameral Congress, whose members are elected to five-year terms through direct, popular suffrage. Executive power is vested in the president, who is both the head of government and the head of state, and the vice president, both of whom are also elected to five-year terms by popular vote.
Local government
Guatemala is divided into departamentos (departments), each headed by a governor appointed by the president. The departments in turn are divided into municipios (municipalities), which are governed by councils presided over by mayors, elected directly by popular ballot.
Justice
The Supreme Court, with at least nine justices, has jurisdiction over all the tribunals of the country. The justices are elected by Congress for terms of four years.