Guatemala remains one of the most unequal countries in the Americas and with a poverty rate that exceeds 50 percent. Government after government, program after program, is supposed to tackle inequality and poverty but to no effect. Maynor Cabrera, Nora Lustig and Hilcías E. Morán recently completed a Commitment to Equity (CEQ) Policy Assessment for the country and the results are not that pretty. Here is their abstract:
In 2010, according to the CEQ analysis for Guatemala, fiscal policy did almost nothing to change inequality and poverty. Recent developments on fiscal policy make things worse. A reduction in social spending, particularly in the flagship CCT program “Mi Bono Seguro” will negatively impact poverty and inequality. A reform of the personal income tax will result in lower fiscal revenues. The combined effects of these changes will likely result in an increase of poverty and inequality and reinforce the chronic status quo of poverty and inequality in Guatemala.
Come on, there needs to have been something positive?
Our analyses of the redistributive effects of fiscal policy were made for the year of 2010. What has happened since? Have there been changes that would result in an increase the income redistribution and poverty reduction effects of fiscal policy? Quite the contrary. Because tax revenues have been insufficient to cover government spending and have been growing at a slow rate (despite fiscal reforms introduced in 2002), the tax burden (revenues as a percentage of GDP) remained at about 11 percent in the last three years.
In order to offset this weakness on the revenue side, the Guatemalan government has reduced public investment and spending on some social programs. As a result, the fiscal deficit has declined and public debt has stabilized at around 25 percent of GDP. Instead of strengthening the revenue base through a more aggressive direct tax collection on Guatemala’s wealthy (on income and property), the government reduced the tax burden on the rich and increased the tax burden on the middle class. Furthermore, spending on targeted anti-poverty programs was cut.
Nope.
