ReportNo. 7478-GU Guatemala PublicSector Expenditure Review Public Disclosure Authorized May23, 1989 CountryDepartment II LatinAmerica and Caribbean Regional Office
FOR OFFICIAL USEONLY Public Disclosure Authorized Public Disclosure Authorized
Public Disclosure Authorized Documentof the World Bank
Thisdocument has a restricteddistribution and may be usedby recipients onlyin theperformance of theirofficial duties. Its contents may not otherwise bedisclosed without World Bank authorization. CURRENCY EQUIVALENTS
US$1 = 2.70 Quetzales (Q)
ABBREVIATIONSAND ACRONYMS
AVIATECA - Empresa Guatemaltecade Aviacion (GuatemalanAviation Company) BANDESA - Banco Nacional de DesarrolloAgricola (National Bank for Agriculture Development) BANVI - Banco Nacional de la Vivienda (NationalHousing Bank) CABEI - Central American Bank for Economic Integration EEGSA - Empresa Electrica de Guatemala (GuatemalanElectric Company) EMPAGUA Empresa Municipal de Agua Potable (MunicipalWater Supply Co.) EPNSTC - Empresa Portuaria Nicional Santo Tomas de Castilla (Santo Tomas de Castilla National Port Company) PrGUA - Ferrocarrilesde Guatemala (GuatemalanRailway Company) GUATEL - Empresa Guatemaltecade Telecomunicaciones(Guatemala TelecommunicationsCompany) IDB - Inter-AmericanDevelopment Bank ICTA - Instituto de Ciencia y TechnologiaAgricolas (Institute of Science and Agricultural Technology) IGSS - Instituto Guatemaltecode Seguridad Social (GuatemalanSocial Security Institute) INDE - Instituto Nacional de Electrificacion (NationalElectricity Company) INDECA - Instituto Nacional de ComercializacionAgricola (National AgriculturalMarketing Institute) INFOM - Instituto de Pomento Municipal (MunicipalDevelopment Institute) INTA - Instituto Nacional de TrarsformacionAgraria (National Institute for Agrarian Reform) MCTOP - Ministry of Communications,Transport and Public Works MSP - Ministry of Public Health NGOs - Non-GovernmentalOrganizations SEGEPLAN - Secretaria General de Planificacion (General Planning Office) UNDP - United Nations Development Program UNEPAR - Executing Unit for Rural Water Supply USAID - United States Agency for InternationalDevelopment
FISCAL YEAR
January 1 to December 31 FOR OFFCIAL USE ONLY
Page 1 of 2 COUNATRYDATA - CUATOKALA
AREA POPULATION D8D&ITY (1986)
108 9 thcus. sq he. In sIllion 8.438 (1q87) 77.5 per sq. kme. Rate of 0rowth: 2.92 (1980-8S) 269.5 per sq. km. of agriculturalland
POPUJLATIONCH4ARACTERISTICS 1965 1973 1966 IeALTH (1986)
Crude B3irthR&.t* (per 1000) 46 45 40 Populetionper physician 8.600 Crude Death Roet (per 1000) 17 1a 10 Populati~ o, e hosputel bed 800 Infant Mortality(per 1000 line births) 112 92 65
INCOMEOISTRIOUION (Pri-. Ir.con,.Recoi.*d by) 1973 1986 ACCESS T0 ELEACTRICITY(1966)
Highest 20 percent 601 889 1 of d.ellina*- total 37.2 Lo.ast.20 percent 88 61 L.eeot 40 percent 131 148 ESUCATION 1965 1973 1986
ACCESS TO SAFE WATER 1965 1973 198$ EnrolleentRates: ------PrissryF Total 508 616 761 T Percentof population: otal 11 39 51 Malo 655 6716 801 Urban 30 as 9 Female 451 883l 721 Rurel 2 14 26 Secondary:Total as 121 171 Kael 101 121 171 MfEIRITION 1968 1973 1988 Feeale 71 111 161
nenFood ProduccionPor Capita (1979.100) 54 78 108 (INPPER CAPITA 1985 1973 1956 rer Capita Supply of Calories/day 2.028 2.1.50 2.345------P., Capita Supply of Proteins grass/day 57 57 61 (CurrentUS Dollars) 300 430 930
1980 1966 1967 AAB6UALGROWTH RATES (N, conset,prices)
CROSS NATIONALPRODUCT oilI. QI ODP oil. Q 8 CDP sil. Q I CDP 1968-73 1973-60 1980-65 196 1966 1987
MOPat earkat prices 7.679 100.0 15.8363 100.0 17.595 100.0 6.1 F.S -0.5 -0.6 0.1 3.1 Groom Do...stic In-esteent 1.252 16 1.637 10.3 2,431 13.8 5.2 7.0 -8.1 -19.1 0.2 31.4 Cros National Sacings 1.075 13.6 1.481 9.4 1.037 5.9 7.9 3.2 -14.5 -22.6 34.1 -4.8 Current AccountBalance (176) -2.2 (93) -0.6 (1,394) -7.9 nt.&. n.a. n... n.e. n.a. n.a. Eaports of Goode A NPS 1.748 22.2 2,542 16.1 2,807 16.0 7.0 5.2 -4.6 3.1 -14.0 6.0 Ia.p.rt.of Goo~dsA NFS 1,96 24.9 2.311 14.6 3.948 22.4 3.3 5.6 -9.9 -12.6 -14.7 47.1
Value Added Labor Porce V.A. per Worber
OUTPUT, LABOR FORCE AND PROODUCTIVITY 1960 1967 1980 1987 1960 1967
(Constant 1980 Prices) oil. Q (1) oil. Q (1) EsplO00 (1) Emol.000 (I) Quatnal (1) Quetonl (1)
Aqriculture 1.958 24.8 1.978 25.7 1.034 49.4 838 36.2 1,894 44.6 2.360 69.2 Industry 1.733 22.0 1,54S 20.1 384 16.9 378 16.3 4.890 115.1 4.084 119.7 se-i~ces 4.189 83.2 4.166 54.2 703 33.6 1,089 47.8 8,958 140.3 3.792 111.1
TotalI/A,-ra,o 7.879 100.0 7,689 100.0 2.091 100.0 2,318 100.0 4.247 100.0 3.412 10000
N,llion Quetoslee As percent of current CDP
CONSOLIDATEDNONFINANCIAL PUBoLIC SECTOR 1981 1962 1983 1964 1988 1986 1987 1981 1982 1983 1964 1988 1988 1987
A. TVotalCurre.nt Renenun 974 1012 964 983 1162 1i81 2144 11.3 11.8 10.9 10 4 10 8 it 1 12 T 8. otal Curr,nt E.penditure b,77 878 678 952 1038 1605 1974 10.2 10.1 9.7 10 1 9 - 10.1 II 2 C Current.8Balec. 97 134 107 33 146 147 170 1.1 1.8 1.2 0.3 1 3 0. 1 o
0. C.P,tal R-on..uea 9 16 10 6 5 64 90 0.1 0.2 0.1 0.1 00 0 4 0 S E Capital E.penditurne 724 546 413 380 301 314 467 6 4 6.3 4.6 3.8 2 7 2 0 92 8 1 Fi..d Capital Forestion 682 810 366 306 259 297 428 7.9 8.9 4.3 3.2 2 3 1 2 4 2 Other Cap,tal Expenditures 42 38 26 54 42 17 89 0.5 0.4 0.3 0.6 0.4 0 1 0 3
C O,erallBele-co -618 -396 .297 -322 -150 -103 -227 -7.2 -A.5 -3.3 -3.4 -1.3 -O 6 -1 3 1 off,cial Capital Grentt 1 1I 1 2 1 0 198 0.0 0.0 0.0 0.0 0 0 0 0 1 1 2. Net Fore.gn F..Pnc.ng 109 108 124 21 26 68 68 1.3 1.2 1.4 0 2 0 2 0 4 0 4 3 Net Donent.c F.na-nq. 808 283 172 299 123 35 64 5.9 3.3 1.9 3.1' 1 1 0 2 0 4 4 Other 0 0 0 0 0 0 -101 0.0 0.0 0.0 0 0 0 0 0 0 -06
This document has a testricted distribution and may be 'ised by recipients only in the performance of their officialduties. Its contents may not otherwise be disclosedwithout World Bar.kauthorization. Page 2 of 2 COUNJTRYDATA - IRJATEOIALA
MONEY,CREDIT AND PRICES
(MillionQ-atualas) 1980 1Q81 1982 1983 1984 1985 1986 1987 floe3 aid Quasi Money 1.692 1.907 2,191 2 155 2,399 3,193 3,875 4,166 CIa;as on Governmenet(Net) as9 780 1.081 1i2n 1,54) ',703 1.244 981 Claias on Private Sector 1,222 1,388 1,518 1,710 1,907 2,078 2,281 2.751 Claima on Other Financial 29 72 21 44 38 24 18 37
Money and Quasi Money as I of 001' 21.5 22.2 25.1 23.8 25.8 28.8 24 5 23 7 Co.u..e, Price Inden (1980n100) 100.0 111.4 111.8 118.8 120.8 143.4 198 4 220.9
Annus' percentagechanges in: C.onsume Price 1nden 10.71 11.41 0 41 4.61 3.41 18 71 37.01 12.51 Claims on Govermeant (Net) 240.01 124 51 39.81 15 21 28.81 9 91 -27 01 -21.11 Clie;s on PrivateSector 95.31 147.41 -70.91 113.01 414.21 -23 71 -45.51 138.71
8ALAPCE OP PAYNDITS (USS M;illone) 1980 fl81 1982 1Q33 1984 1985 1988 1Q87 MERCrIANDISEEX(PORTS ------(Average 1980-87) mi. USI (1) Eaportsof Goode and NFS 1,748 1,471 1,288 1.178 1,231 1,182 1,161 1,138 ------Marchandica(FOB) 1,520 1,291 1,170 1,092 1.132 1.060 1,044 978 Coffee 393 0 33 9 Non-Factor Services 228 180 118 84 99 102 117 159 Cotton 78 2 6.8 Sugar 85 7 5.7 Importsof Goode and NFS 1,983 2.031 1.829 1,317 1,435 1,282 1,053 1,599 Banana 74.2 8 4 Morchendica(FOB) 1,472 :5b40 1.284 1.058 1,182 1,077 878 1.333 Meat 18 5 1.4 Non-Factor Services 491 491 345 281 253 185 17Q 285 Other 533.2 48.1
Reaource Balance (215) (581) (341) (141) (204) (101) 108 (482) Total FOB 1,180.8 100 0 Net Factor Income (711 (103) (121) (113) (1-03) (188) (199) (172) Factor Rec,.ipts 77 55 24 29 so so 33 31 Factor Paysents 147 158 145 143 262 215 232 203 EXTERNALDEBT (end period) (MLT interestpaymen.ts) 80 83 77 89 95 114 208 178 (U.14Milos 1980 1988 1987 Net CurrentTransfers 110 91 83 31 29 20 51 70------.. MALT Public & Pub. Guara. 551 2,151 2,084 Currant AccountBalance (178) (573) (399) (224) (378) (287) (42) (584) Short Term Debt A IMF 335 323 508 Non-Guaran.teedPrivate Debt 282 119 118 Long-TermCapital Inflos 244 407 350 298 147 101 184 2Q1------Direct Investmen.t a5 110 78 45 38 81 89 91 Total Outstanding& DisIurad 1,188 2.593 2,6888 Official CepitslGrants 0 0 0 0 0 0 48 128 Net LT Loans (OAS data) 92 280 279 214 85 29 5 (147) Disbursements 170 344 337 317 254 285 184 171 DEBT SERVICE RATIO Repayments 78 65 59 103 170 235 17Q 318 (percent) 1980 1Q88 1987 Other LT infloos (Net) 58 17 (7) 34 24 11 82 221------MALT Public A Pub. Cuaro. 2.5 31.4 41.5 Total Oth,erIteas (Net) (387) (182) 22 (40) 249 71 (142) 233 Short Term Debt A IMP 1 7 8.8 2 8 Non-GuarantaadPrivate Debt 8 1 1.0 0 9
Changes in Net Resarva.(nn 319 348 28 (29) (18) 95 0 40 Total OutstandingA Diobureed 9.2 3Q 2 45.1 Net cre.ditfron IMF 0 113 0 41 20 (49) (58) (20)
EXCHIANGERATES 19630 1981 1982 1983 1984 1985 1988 1987 IBRD LENDOING(nl. USUI 1Q84 1985 1988 1987
Of.vical Rats: Commitments 50 0 44 8 0.0 0.0 Byett. par UISS(and period) 1 000 1.000 1.000 1.000 1.000 1.000 1.000 1 000 Bust:, per USII(peri,d mug I 000 1 000 1.000 1.000 1.000 1 000 1.000 1.000 Gross Diebures-ent 7.9 48 6 17 0 11.7 PrincipalRepayment 13 8 14 2 17 0 22 0 BanbingRate: Net Disbureenant (5.7) 34 4 0.0 (10.3) Bust: par US15(end period) ------2.500 2 500 InterestCharges 12 4 It 4 21 0 23 0 Bust:, Par US; (per,odsav) ------2 500 2.500 Net Transfers (18 1) 23 0 (21 0) (33 3)
Marbet Rats: Debt OutstandingA D'sb 188 8 '2212 278 7 330 0 Bust:. per USS (and period) - - - - - 2.850 2 570 2 510 Debt OutstandingA Ucd, 284 0 299 0 282 4 282 4 Bust:. per liSt(Period avg) ------2.850 2 700 GUATEMALA
PUBLIC SECTOREXPENDITURE REVIEW
TABLEOF CONTENTS
EXECUTIVESUMMARY
CHAPTERI: PUBLIC SECTOREXPENDITURES AND RESOURCE MOBILIZATION...... 1
A. Public Expenditure Fram,ieworkand Recent Trends ...... 2
Trends in Government Expenditure ...... 2 Public Sector Revenues ...... 4
B. Future Expenditure Options and Financing Requirements. 6
Level of Public Expenditures (1988-1991) ...... 7 Composition of Public Expenditures (1988-1991) ...... 8 Improving the Allocation of Public Expenditures in the 1990s ...... 11 Financing Requirementsand Sources...... 13 Public Savings, Investmentand Growth (A Macro-economic Scenario)...... 16 Growth, Domestic Savings, and External Debt ...... 19 Private Funding for Development...... 20 Concl' ions and Principal Recommendations...... 20
CHAPTER II: AGRICULTURE SECTOR ...... 22
Sectoral Organization ...... 22 Principal Sector Issues and Development Priorities .... 23 Public Expenditures in Agriculture ...... 25 Planned InvestmentProgram in Agriculture (1988-1991).. 26 Ongoing InvestmentProjects ...... 26 New Investment Projects in Agriculture ...... 27 Agriculture Credit...... 28 Conclusions and Principal Recommendations ...... 29
This report is based on the findings of an economic mission that visited Guatemala in April/May 1988. The mission was composed of George Park (Mission Chief), Tarsicio Castaneda (Health Sector), Chris Hennin (Non- Governmental Organizations),Pablo Jordan (Consultant,Housing and Municipal Development), Jose Marques (MacroeconomicFramework), Abel Mateus (AgricultureSector), Thomas McCarthy (Consultant,Agriculture Sector), Cesar Vallejo (Consultant,Planning and Project Execution), and Andrew Vandendriessche (Public Expenditure Programming). In addition, Ricardo Klockner and Luis Luzuriaga helped prepare the chapter on power, Ricardo Klockner and Adan Cajina (consultant)the chapter on water supply, and Shanta Pai the chapter on telecommunications. The report has been revised and updated following discussionswith the Government in December 1988 and January 1989, including a revision of the public sector investmentprogram to incorporatepreliminary estimates on expenditures in 1988 to the extent data was available. - 2 -
CHAPTER III: POWER SECTOR ...... 32
Key Sector Issues .. 32 Sector Investment Program, 1988-1991 .. 33 Financing Needs . .35 Conclusions and Principal Recommendations...... 36
CHAPTER IV: THE TRANSPORT SECTOR .... 38
InstitutionalFramework .. 38 Planned Investment in Transportation . .39 Roads Subsector .. 40 Ports Subsector .. 42 Railway Subsector .. 42 Aviation Subsector .. 43 Conclusions and Principal Recommendations 43
CHAPTER V: TELECOHMUNICATIONSSECTOR .. 44
InstitutionalFramework. 44 Current Service Levels and Sector Development Objectives .. 44 Sector Constraints .. 45 Sector Financing...... 46 Investment Program (19&S-91) and Financing Plar. 47 Conclusions and Principal Recommendations 50
CHAPTER VI: WATER SUPPLY SECTOR ... 31
Key Sector Issues ...... 52 Programmed Investments (1988-1991) .. 53 Conclusions and Principal Recommendations 56
CHAPTER VII. THE SOCIAL SECTORS (Health and Education).59
A. Health Sector Needs, InvestmentProgram, and Financing...... 60
Key Sector Issues and Expenditure Priorities 61 Government'sProgram .. 63 Proposed Investment Program, 1988-91 .. 63
B. Education Sector Needs, Investment Program and Financing...... 66
Key Sector Issues ...... 67 Government'sProgram .. 68 Proposed Investment/ExpenditureProgram .. 70
C. Conclusions and Principal Recommendations 71 - 3 -
CHAPTER VIII: HOUSING AND URBAN DEVELOPMENT ...... 74
A. Housing Sector Needs, InvestmentProgram and Financing ...... ,4
InstitutionalF.7amework and Key Sector Issues ...... 74 Public Expenditures in Housing and Urban Development .. 75 lHousingSector Needs and Revised Policy Framework ..... 77
B. Urban Development ...... 77
Sector Organization...... 7e Municipal Finance Issues ...... 78 INFOM's Investment and Expenditure Program ...... 78 Municipal Investments in Guatemala City ...... 81 Combined InvestmentProgram for Housing and Urban Development ...... 81
C. Conclusions and Principal Recommendations ...... 82
CHAPTER IX: STRENGTHENINGPLANNING, PROJECT PREPARATION, AND PROJECT EXECUTION...... 85
Planning and Programming of Investments ...... 85 Project Preparation ...... 87 Project Execution ...... 88
CHAPTER X. OVERA1,LCONCLUSIONS AND RECOMMENDATIONS...... 92
ANNEXI: The Tax Regime...... 100
ANNEXII: Macroeconomic Projections...... 109
ANNEXIII: The Role of NGOs in Guatemala...... 116
STATISTIC-ALAPPENDIX ...... 318
Section I: Standard Tables...... 119 Section II: Public Sector Investment Program...... 132 Section III: Other Sector Tables...... 150 EXECUTIVE SUMMARY
Introduction i. Guatemala confronts major social, political and economic challenges as it strives to consolidate its newly established democratic framework; improve the well being of some 60 to 70 percent of the population living in poverty; and reestablish a sound macroeconomic framework for sustained economic growth. These challenges are compounded by the limited and uneven provision of basic social services, rapid population growth, and the country's fragmented social structure. Almost half of Guatemala's 8.4 million people are indigenousdescendants of the Maya civilization,with only limited assimilation into the socio-economic mainstream. ii. Following many years of military rule, a democraticallyelected civilian Government took office in early 1986. This Government has undertaken the difficult task of stabilizing the economy and developing the medium term policies required to restore sustained economic growth, tackle the country's major social issues, and strengthen the fledgling democratic system. At the heart of the Government'schallenge is the need to mobilize and utilize public resourcesmore efficiently,while at the same time ensuring a macro-economicframework conducive to private sector investment and renewed growth. This report is part of an ongoing World Bank effort to support the Government'sefforts to reorganize and strengthen management of the public sector. It analyzes the overall allocation and use of public sector resources, the content and focus of the public sector investment program, and projected financing requirementsthrough 1991.
Macroeconomic Background iii. After several decades of substantial growth averaging close to 6 percent of GDP during the 1960s and 1970s, Guatemala's economic performance declined sharply in the early 1980s as the country's external terms of trade deteriorated, internal political difficultiesmounted, and macroeconomic adjustment efforts were untimely or insufficient. The uncertain political and economic climate in Guatemala and the rest of Central America exacerbated capital flight, and sharply reduced private domestic and foreign investment, as well as external financing. By the middle of the 198Cs Guatemala faced serious economic and financial problems: foreign trade was virtually at a standstill owing in large part to an unmanageablemultiple exchange rate regime; inflationwas running over 30 percent; investmentand national savings were nearly half the level of the 1970s; arrears on external payments had reached about $600 miliion; - ii - and GDP was 6 percent below its 1980 level. The sharp decline in GDP and much lower fiscal revenues also prompted a rapid increase in external borrowing, with medium and long term debt more than tripling to US$2.5 billion by 1987. iv. Upointaking office in early 1986, Guatemala's democratically elected Government moved quickly to stabilize the economy, taking measures to impr3ve exchange rate management, reduce the fiscal deficit and increase interest rates. These measures, combined with favorable coffee prices, resulted in a substantial improvement in economic performance,with GDP growing by 3 percent in 1987, the first real growth in several years. Faced with renewed balance of payment pressures in late 1987 and 1988, the Government took additional stabilizationmeasures in 1987 and mid-1988. Despite its success in stabilizing the economy, however, the Government's efforts to improve resource mobilization and accelerate public sector investment have been less successful.
Public Expenditure Trends and Key Issues v. Faced with a major decline in tax revenues in the first half of the 1980s, the Government drastically cut public investment and constrained other public expenditures,especially in the social sectors. Total public expenditures fell from 16 percent of GDP in 1980 to 12 percent in 1985, while capital outlays were cut by more than half, falling from over 6 percent to 2.7 percent during the same period. Since 1986, public expenditureshave begun to recover, with recurrent expenditures growing faster than public investment, owing mainly to efforts to make up for previous declines in real wages. At the same time, as a result of continued problems in project management and budget constraints, capital outlays fell further to only 2 percent of GDP in 1986. Public investment increasedmoderately to 2.8 percent of GDP in 1987 and preliminary estimates indicate the same level for 1988. Total public expenditures in 1988 reached about 14.5 percent of GDP, still below the 1980 level. vi. These trends highlight three underlying expenditure issues. First, Guatemala's overall level of public expendituresis low, especially when compared with the range of unmet needs of its population. In fact, Central Government expendituresare only about one-half of the level in other countries with a similar level of per capita income. Second, the share of current expenditures,particularly wages, appears to be high in comparison with the relatively limited coverage of basic services and the small size of the public sector investment effort. This reflects both low public sector productivityas well as overstaffing,especially in a number of public enterprises. Third, the level of public sector investment actually executed remains very low, again in comparison with the country's priorities for expanding basic services and ensuring an adequate and well maintained infrastructureto support growth objectives and the export drive. - iii -
ResourceMcbilization Issues and Basic ExpenditureOptions
vii. The relativelylow level of public spendingresults mainly from an equallylow level of resourcemobilization. Guatemala's tax burden (tax revenuesdivided by GDP), is estimatedat 8.8 percentof GDP in 1988, and remainsone of the lowestin the world. Moreover,despite approval of a tax reformpackage in late 1987, revenuesare expectedto declinein the next few years as exporttaxes are being phasedout and importtariffs reduced. The country'spoor revenueperformance results in largepart from poor tax administration,with tax evasionreportedly extremely high. There is thereforea clear need to strengthentax and customsadministration, introduceadditional tax measures,as well as adjustpublic utility tariffs and other user charges,if Guatemalais to financea higher levelof investmentand providethe additionalbasic socialand other services needed,without recourse to overlyhigh levelsof externalfinancing and domesticborrowing.
viii. The Governmentfaces three main optionsin matchingresources with expenditureneeds. First,it cmn seek to improvethe capacityof the p..blicsector to utilizeresources more efficiently,while also mobilizing additionaldomestic resources, coupled with a judicioususe of additional externalresources. Second,if sufficientadditional domestic resources are not mobilizedit can sharplyincrease foreign borrowing. Third,it can cut growthand expendituretargets and thereforelimit resource requirements.Both the secondand third optionsraise major questions. There are clearlylimitations on Guatemala'sdebt servicingcapacity, and lower expenditureand investmenttargets would underminethe country's abilityto increasegrowth and achieveGuatemala's social, economic, and politicaldevelopment objectives. As a consequencethis repor:.argues that Guatemalahas no choicebut to followthe firstoption, namely increasing the mobilizationof domesticresources combined with a carefuluse of additionalexternal assistance, while sharplyimproving the utilizationof resources.
ReshapingPublic Expenditure and InvestmentPriorities
ix. In additionto mobilizingadditional resources, our analysison a sectorby sectorbasis confirmsthe need for adjustmentsin the patternand orientationof publicexpenditures. Although, the allocationof investment will continueto have a heavy infrastructurecomponent, given the capital intensivenature of investmentin power and telecommunications,the Government'smedium term objectiveshould be to increasethe share of investmentin the socialsectors to at least 30 percent(it falls to about 24 percentin 1990) reflectinga weak projectpipeline; increase the share of investmentin water supplyfrom about 7 to at least 10 percent;reduce the share allocatedto other infrastructure(transport, power, telecommunications)to about 40 percent;and iv) hold agricultureto a share of about 10 to 12 percent,assuming that major large scale irrigation projectscan be fundedby the privatesector. In terms of GDP, the reconmiendedmedium term publicsector investment target would increase total investmentfrom 2.8 percentof GDP in 1987 and 1988 to 5.0 percentof GDP in 1992-1995. Within this overalltarget, investment in the social sectorswould increaseby about 60 percentto 1.7 percentof GDP while the - iv - share allocated to infrastructurewould remain at 2.7 percent of GDP, about the same level estimated for 1990 and 1991. Nevertheless, the composition of investment in infrastructureshould be shifted to permit increased investment in water supply (from 0.? lo between 0.5 and 0.6 percent of GDP), while investment in power and telecommunicationsis reduced slightly from 1.8 to 1.6 percent of GDP. The share allocated to agriculturewould decrease slightly from the 0.6 percent of GDP estimated for 1990 to 0.5 percent, but remain higher than the 0.4 percent estimated for 1988. Major sector experditure issues are highlighted below.
Agriculture Sector x. Agriculture remains Guatemala'smost important sector, accounting for one-fourth of GDP and two-thirds of export income, while employing over one-half of the work force. Nevertheless, despite its importance and potential as the principal source for renewed growth and export income, Central Government expenditureson agriculturehave fallen substantiallyin recent years from about 1 percent GDP in 1980 to about 0.3 percent in 1985. Although the share of expenditureshas increased since then to an estimated 0.7 percent of GDP in 1988, the amount of funding for the sector remains inadequate. Indeed public expendituresper person employed in agriculture have been substantiallylower than other countries in Latin America--for example, about one-half of what Bolivia, Costa Rica and Peru spent in 1980. x. Nevertheless,although public spending on agriculture may need to be increased over the medium-term, the first priority should be to improve the utilization and allocation of already available resources, including an accelerated effort to resolve institutionalbottlenecks. There are four basic areas where changes are recommended. First, expenditure priorities need to be adjusted to increase the share of resources budgeted for agriculture extension, while better focusing agriculture investment expenditureson small farmer and poverty alleviation objectives and putting increased resources into natural resource protection, especially reforestation. With respect to future investment in agriculture,this would imply: i) expanding on-going programs in the Highlands aimed at diversifyingproduction of smallholders,including further emphasis on mini-irrigation;ii) expanding soil conservationefforts, including substantially increasing investment and programs aimed at reforestation; and iii) reducing substantiallyplans for sharp increases in public sector investment in larger scale irrigation projects which, given their high cost per hectare and focus on commercial farming, could be financed in large part by the private sector. xii. The second major institutionaland expenditure priority is strengtheningagriculture extension, which is critical for growth of small farmer income and productivity. This will require an indepth evaluation of existing extension efforts to identify principal constraints, coupled with the identificationof alternative approaches to providing enhanced technical assistance to small farmers, taking into account Guatemala's social and geographicaldiversity. One possible approach would be to build on the system of local agriculture representativesnow being established through an expanded training effort, with the objective of maximizing the impact of the Agriculture Ministry's small extension staff. Other approaches might consider the use of model farmers and the introductionof supFportingaudio-visual materials, complementedby private sector and NGO sponsored extension developmentefforts. Simply allocating more resources to extension without first developing an extension improvementprogram would be counterproductive. However, once such a program is developed additional resources woold likely be needed. xiii. The third priority is improving access to agriculturalcredit, which requires both the modernizationand reorganizat'.onof BANDESA (the agriculture bank), as well as considerationof other mechanisms for providing credit to small farmers and ensuring sufficient capital for private investment in input supply, marketing and export ventures. On- going technical assistance efforts to strengthen BANDESA, with support from USAID and the Federal Republic of Germany should be expedited. xix. A fourth area requiring attention is the Government's approach to food security and the limited cost effectivenessand impact of ongoing programs. An indepth review of existing programs and policies is needed, including an assessment of the effectivenessof INDECA's operations. Further investment in INDECA marketing facilities should be halted pending the outcome of such a study. In fact, if resources currently allocated to INDECA were invested in improved extension and rural infrastructure,they would probably result in more food productioa and export crops, as well as higher farmer incomes and lower prices for food, than if these resources continue to be spent on INDECA's limited marketing efforts.
InfrastructureSectors xv. Investments in infrastructureaccount for about 55 percent of total public sector investment programmed for 1989 through 1991, with about 21 percent on average programmed for power, 14 percent for telecommunications,14 percent for transport, and 7 percent for water supply. As a percent of GDP about 1.6 on average is programmed for power and telecommunications,0.3 percent for water supply and 0.6 percent for transport during the three year period. Although the share of investment allocated to water supply appears on the low side, the o-erall content of the investment program in infrastructureis satisfactoryand no majo. changes are recommended or feasible in the shortatwerm.Indeed, the principal challenge in the next few years will be to ensure that even this relatively low level of investment is achieved. This will require a major effort to address serious institutionaland financial issues in the power sector, as well as a substantial improvement in implementationcapacity in all of the other institutionsinvolved in carrying out investments in infrastructure. By the early 1990s, a major effort is needed to double the share of GDP allocated to investments in water supply, while maintaining the share allocated to transport, and reducing slightly the share of GDP allocated to power and telecommunications. Although additional heavy investment in the power sector in the middle 1990s may require an increasing share of GDP, this should be accommodatedby increasing the overall level of public investment rather than penalizing investment in the social sectors. - vi -
Power Sector xvi. Maintaining an adequate level of investment in power, both to increase the current low level of public access to electricity and ensure sufficient capacity in the sector to meet the country's growth objectives, will require a major financial and institutionalrestructuring of the sector. INDE (the power company) faces an extremely serious financial crisis, wtth an expected deficit of QS00 to 600 million over the four year period (1988-1991). As a consequence, INDE's ability to carry out its investment program will depend on Government agreement to, and timely implementationof, a program tos i) reestablishINDE's financial health through a combination of tariff increases, increased operational efficiency, and direct Government financial support; ii) improve coordinationbetween INDE and EEGSA (the principal distributioncompany), while also improving the distributionof activities between INDE, EEGSA, and the municipal power companies; iii) establish a regulatory body for the sector in the Ministry of Energy and Mines to permit adequate external supervisionof the sector's investment plans, finances and operations; and iv) address INDE's serious institutionalproblems, including reducing its serious overstaffing, strengtheningits investment programming capacity, and carrying out existing recommendationsregarding administrativereforms and asset revaluation. xvii. INDE's problems should be addressed within the framework of a detailed adjustment program to be agreed between INDE and the Government. Such a program could take the form of a legal contract spelling out the specific actions to be taken by INDE to strengthen its operations,while at the same time indicating the level and nature of Government financial and policy support. The Government would also need to ensure that INDE would have the autonomy in personnel matters needed to make the staffing adjustments required.
Transport Sector xviii. The current focus of the Government's investment program in transport, with its emphasis on road rehabilitationand rural road construction, is consistent with sector priorities. Nevertheless, the Government faces three basic expenditure issues which affect future investment in the sector1, First, with respect to the road subsector, the principal challenge will be ensuring adequate financing for the program and acceleratingproject execution by the Ministry of Public Works. Estimated investment in the road subsector for the period 1988-91 already shows a lower rate of execution than that proposed in the Ministry's medium term (1988-94) program. Road rehabilitationand maintenance must continue to receive high priority given the deterioratedstate of the road network and its importance in facilitatingagriculture development and exports. Second, the Government needs to carefully review the feasibilityof new investment in the railways which is tentatively planned over the medium term, given the questionableeconomic role of the railways in competition with road transport. No new investment in railways should be considered pending completion of the National Transport Study. Third, with respect to - vii -
ports, the Government should carefully assess the timing and magnitude of proposed new investments in Puerto Santo Tomas de Castilla. Although the country's export development efforts clearly require an efficient port system, new investmentought to be accompanied by, if not preceded by, a program to improve the very low level of port productivity.
TelecommunicationsSector
vx. Guatemala currently faces major bottlenecks in telecommunications which seriously undermine public and private sector productivity. This results from many years of limited investment given serious delays in the implementationof major telecommunicationsprojects. If the very ambitious investment levels programmed for the next few years are to be achieved and service levels sharply improved, overall management of the sector will need to be strengthened,including i) increasing the participationof the private sector in the provision of specialized services, such as data transmisaion,while encouraging the use of private contractors to speed network construction; ii) revising low domestic tariffs, since these reduce the efficiency of service; and iii) improving the project implementation capacity of GUATEL (the state-owned telecommunicationsenterprise) and acceleratingefforts to obtain the additional external financing required for GUATEL's investment program.
Water Supply Sector
xx. Programmed investments in water supply and sanitationare fully justified, however the level of investmentremains low in comparisonwith sector needs and the Government's emphasis on improving the availabilityof basic services. With current spending levels only about 0.3 percent of GDP, there is substantial room for improvement. A possible medium term objective would be to increase investment levels to between 0.5 and 0.6 percent of GDP by 1992-1995, thus almost doubling the current level of investment. This would require extensive restructuringof the sector, including: i) financial reforms to ensure adequate cost recovery, including reform of the antiquatedwater title system and increasing tariff levels; ii) revising the organizationof the sector to improve planning, operations, and project implementation,while eliminating the existing fragmentation in sector institutions;iii) early approval of legislationto better allocate and protect water sources; and Wit expanding project preparation activities in local communities,while also focusing on increasingly serious contaminationproblems stemming from the inadequate management of toxic wastes.
The Social Sectors xxi. Guatemala's provision of public social services and efforts to meet the basic needs of its rapidly growing population have been inadequate. As a consequence,health indices are worse than many countries in Latin America, literacy rates remain among the lowest in the continent, and the country confronts a serious shortage of housing meeting minimal standards. Given these serious constraints, the Government's development program rightly stresses the importanceof allocating more resources to primary health care and primary education, while also facilitatingthe availabilityof basic housing. At the same time, the Government has - viii -
substantiallyincreased the amount of resources available for municipal development through the transfer of 8 percent of ordinary revenues directly to the municipalities for purposes of capital investmentin infrastructure and public services. Achievement of these broad goals in the social sector will require first, a majol improvement in the utilization of existing resources,and second, a substantial increase in the level of funding for the sector. This increase in resources should include not only increased public funding, but additional efforts to facilitate the use of private sector resources, including NGOs, and further mobilization of local community resources. As a medium-term target, public sector investmentin the social sectors (health, education, housing/urbandevelopment) should be increased from the estimated level of 1.2 percent of GDP in 1990, including the 8 percent transfer to the municipalities,to about 1.7 percent of GDP by 1992-1995. At the same time, part of the additional resources needed to meet basic social needs could be provided under the proposed Social Investment Fund, which would open up additional funding channels for municipalities,NGOs and other community organizations.
The Health Sector xxii. The difficultywhich the Government has in not being able to provide adequate health care reflects not only inadequatefunding, but also inefficientutilization of existing resources,combined with continued overemphasis in practice on more expensive curative care as opposed to basic primary health care and preventive medicine. Primary health care has received only about one-fourth of current expendituresand less than one- fifth of capital expendituresin the last few years. At the same time, poor hospital administrationhas led to an explosive increase in current expenditures for curative medicine, which almost doubled since 1986, while still leaving the hospitals without adequate resources for maintenance and supplies. Expenditure adjustments in health should focus initially on increasing the share of resources allocated for primary and preventive health care; increasingthe share of resources allocated to rural areas, thus beginning to correct the current bias towards Guatemala City; and ensuring adequate funding for materials, supplies, and maintenance. Increasing resources for preventivemedicine and primary health care is far the most cost effective way to improve the overall health of Guatemala's population. xxiii. These adjustments do not necessarily require major increases in total resources available to the sector in the short-term,but better and more cost effective use of existing staff, while adjusting the mix of staff and physical resources.As such, the Health Ministry should focus on training and recruitingprimary health care personnel while redeploying more staff to rural areas. At the same time, a major effort is needed to improve the targeting, coordination,and cost effectivenessof on-going preventive and primary health care programs managed by the Ministry of Health. As a second priority, the Government should begin preparation of an expanded investment program, with emphasis on primary health care, since the level of investment in the sector will fall sharply in the next few years unless a very weak project pipeline is strengthened. As a minimum the goal should be to increase the level of investment from 0.2 percent of GDP as projected for 1990 to at least 0.4 percent of GDP in 1992-1995. Finally, in addition to increasing investment expendituresin the sector, the overall level of resources allocated to the sector must be increased - ix - over the medium-term if health indicators are to improve. As a medium term goal the Government should aim at increasing the total share of expenditureson health (including investment) from less than 1.5 percent of GDP at present to at least 3.0 percent by 1995.
The Education Sector xxiv. Although Guatemala's education system has grown rapidly over the past 20 years, the current educational profile remains similar to the least developed countries in Latin America. The overall literacy rate is low, 52 percent on average and less than 15 percent in some rural areas. Over two-fifths of the labor force has no formal schooling and another quarter only 1 to 3 years of schooling. This poor level of educational achievement reflects a long history of under investmentand misdirected investment in the sector. Until recently, less than 2 percent of GDP was being spent on education compared to about 4.5 percent in other developing countries. At the same time, the allocation of expenditureshas been skewed, with an unduly high share devoted to higher education, and with insufficientresources programmed for teaching materials and support of primary education, particularly in rural areas. In addition to improving the quality and coverage of the system, the country faces the additional challenge of coping with the country's ethnic and linguistic diversity. xxv. Although the Government has moved to increase spending in the sector, further efforts are needed. The principal expenditure adjustments recomuen?ed include: i) making better use of available resources through improved utilization of existing facilities and improved management and supervision of teachers; ii) increasing the share ef resources allocated to primary education as well as to supplies and materials, while decreasing the share allocated to higher education; iii) developing new educational investment initiatives for the 1990s to strengthen a weak project pipeline; and iv) increasing the overall share of public resources allocated to education over the medium term. This will require not only increased Central Government participation,but also increased use of local community resources. The overall goal should be to increase the share of resources allocated to education from the current low level of about 2 percent to about 4 percent of GDP by 1995, with the share of investment in the sector increasing from an estimated 0.1 percent of GDP in 1990 to at least ('.3 percent of GDP in 1992-1995.
Housing Sector xIVi. Guatemala's housing deficit, which is substantial,is currently estimated at over 700,000 units, with public and private housing output meeting only a very small portion of needs. Since most families have a roof over their heads of one form or another, this deficit indicates mainly the very high level of very poor quality or substandardhousing. Efforts to resolve the country's housing shortage, require adjustments in sector financing as well as policies. The challenge is to: i) introduce financial sector reforms which will encourage increased private sector involvement in housing finance; ii) rationalizeBANVI's operations and complete ongoing initiatives to remedy serious organizationaland financial constraints;and iii) develop new approaches to meeting the housing needs of the urban poor, focusing more on self-help and housing rehabilitation,while also tackling land tenure issues. Municipal Development xxvii. Prospects for acceleratingmunicipal development in Guatemala's secondary and smaller cities have improved considerablyin the past few years as a result of the Government'sdecentralization effort and the allocation of 8 percent of general revenues for fixed capital investment. Nevertheless,most secondarymunicipalities have little or no capacity to effectively program and manage development projects. Additional technical assistance is urgently needed, particularlynow that the easy and more obvious investment needs are being taken care of. This will require enhancing the capacity of INFOM to provide technical support, as well as facilitating the efforts of NGOs and other community groups to provide direct support to municipalities.
Level of Public Expenditures (1988-1991) xxviii. During the 1988-1991 period total spending for the consolidated public sector is projected to increase slightly from about 14.5 percent of GDP in 1988 to 17 percent in 1989 through 1991, with expenditureson public sector investment increasing from an estimated 2.8 percent of GDP in 1988 to an average of 4.5 percent of GDP for the remainder of the period. Higher spending levels are not feasible in the short-term, since achievement of even the projected levels already assumes substantial additional resource mobilization as well as major improvementsin the execution of the public sector investment program. The proposed investment levels for 1989-1991 are adequate provided the expenditure targets are achieved. Guatemala cannot continue to maintain public sector investment levels of less than 3.0 percent of GDP, if it is to meet its social and basic infrastructureneeds. Urgent efforts are therefore needed to ensure that the minimum 4.5 percent of GDP target is indeed reached.
Financing Requirementsand Sources (1989-1991) xxix. Total public sector financing requirementsfor the period 1989 to 1991 would average about 19 percent of GDP per jear, including loan amortizatior.needs as well as current and capital expenditures. Of this total, about 80 percent (15 percent of GDP) is expected to be financed from domestic resources and already available external funds. The remaining gap of about 4 percent of GDP would be met in part from new external financing, leaving about 2 percent of GDP to be financed through increased domestic resource mobilization, including improvementsin tax administration,other tax reform measures, and increases in public utility tariffs and other users charges. Alternatively,a portion of the gap could be filled with additional external grant financing. However, continued undue reliance on grant financing is risky since its is unlikely to be available over the medium term. - xi -
Public Savings, Investment and Growth xxx. The macroeconomic projection scenario prepared as background for the analysis of public expendituresconfirms the importance of a stepped up public and private sector investment effort if Guatemala is to achieve GDP growth averaging between 4 and 5 percent per annum, which is the minimum considerednecessary to begin making up for the sharp economic deteriorationexperienced in the early 1980s. In fact, even with GDP growth at the 4 to 5 percent level, Guatemala would still require about ten years to return to its 1980 level of per capita GDP, assuming that population growth averages about 2.7 percent per year. xxxi. The high case scenario assumes that gross fixed investment would need to grow gradually from about 14 percent of GDP in 1988 to 19.5 percent in 1995, reflecting both a recovery in private fixed investment as well as the increase in public sector investmenL to 5 percent in 1992 and thereafter. At the same time, domestic savings would have to increase from 8 percent of GDP in 1988 to 18 percent in 1995. This savings effort would require continued austerity in public expenditure policies as well as a significant effort to increase public savings from 1 percent of GDP in 1988 to 2.5 -ercent in the 1990s. To achieve the projected level of growth Guatemala would also require substantial external financial support. The projections assume: i) official grants averaging US$90 million per year; ii) gross disbursements from bilateral sources averaging US$30 million per year; iii) a sharp increase in gross disbursementsfrom multilateral institutionsfrom US$100 million in 1988 to close to US$200 million per year; iv) gross disbursements from financial institutionsaveraging about US$75.0 million per year (including the roll-over of existing obligations); and v) additional assistance to cover the large unfinanced gap of about US$280 million per year, with about one-third being filled by suppliers' credit and the remaining US$180 million from bilateral or other sources.
StrengtheningPlanning, Project Preparation and Project Execution xxxii. Resource mobilizationand improved targeting and allocation of public resources are major issues on Guatemala's development agenda. Other important issues include the need to improve planning, proiect preparation and project execution. Inadequate planning and project preparation reduces the Government'sflexibility in programming investments to meet its development objectives, increases the risk of introducing low priority projects with poor returns into the investment program, and limits the Government's ability to channel external assistance into well defined priority areas. At the same time, the public sector's poor project execution performance restricts the Govenrnment'sability to attract additional external support, increases the cost of major projects both in terms of higher commitment and other loan charges as well as higher prices, and delays the initiation of project benefits with obvious costs to the economy as a whole. xxxiii. Investment programming has become largely an ad hoc process in recent years, determined mainly by individual agencies, depending in part on their political clout, and allocationsmade by the budget office, often without sufficient information or guidance on priorities. Recognizing the importance of a stronger planning and investment coordinating function, the - xii -
Government has recently moved to strengthenthe planning agency's capacity to program investmentsby introducing a number of organizationalchanges. Nevertheless,although the new arrangement provides a stronger functional basis for planning, SEGEPLAN (the planning agency) will require considerable strengtheningin the areas of investmentprogramming, project evaluation and monitoring. In the meantime, it would be helpful to establish a small working group of economists and sectoral experts from SEGEPLAN and other entities to: i) establish the principal policy adjustments and spending needs for each key sector; ii) review existing programs and budgets to determine how well these priorities are being met; iii) identify the specific programs and/or projects which either need to be restructuredor prepared to achieve the Government's objectives; and iv) help prepare expenditure guidelines for preparation of the 1990 budget. This should be combined with preparation of a public sector investment program and overall spending guidelines for the next three years consistent with the expected availabilityof resources and the macroeconomic framework. xxxiv. Deficient project preparation is one of the most important bottlenecks slowing Government development efforts. First, there are simply not enough projects being prepared. In fact the only substantive preparation work is being carried out largely by external donors, thus giving them a major role in determining investmentpriorities. Second, many of the projects have been only partially prepared, particularlyin respect to implementationand procedural arrangements, thus opening the way for serious delays during execution. To help resolve this problem, the Government should take the necessary steps to make the proposed National System for Financing Pre-investment(SINAFIP) operational, while ensuring that procedures for the system are as simple and straightforwardas possible. In addition, without waiting for SINAFIP, SEGEPLAN should review existing project preparation efforts and identify which preparation work should be stopped, accelerated,or started in accordancewith the Government'scurrent priorities. Without a major project preparation effort, public sector investmentwill most likely decline during the 1990s. xxxv. Poor or slow project execution remains one of the most serious constraints on public sector investment. More than anything else, improving execution requires the appointment of experienced project managers, while ensuring that they have the high level support and adequate financing needed. At the same time, to better ensure that the project manager can operate effectively, it is important that: i) the administrativeframework and operational requirementsfor project implementationare fully worked out during project preparation; ii) project conditionalityis realisticallydefined; and iii) adequate mechanisms for monitoring project execution and rapidly resolving implementationproblems are established. Recent Ministry of Finance initiatives to improve the management of external financial resources have begun to improve coordination and monitoring of priority investmentprojects. These efforts need to be continued and further strengthened. - xiii -
Conc lus ion xxxvi. Guatemala is fortunate in that it has no major "white elephants" in its public sector investmentprogram. At the same time, it does not face the need to make major cuts in investment as has been the case in many other countries. Nevertheless, Guatemala faces the difficult challenge of improving the mobilization and utilization of limited public resources if the country is to pay its "social debt" and achieve its growth objectives. The additional public sector resource mobilization and savings effort of 2 percent of GDP recommended in the short-term constitutes the minimal effort needed if Guatemala is to begin to tac ^e its basic developmnentchallenges. Given the country's current low tax ra,.o, this effort sho'uldnot represent a major sacrifice. Indeed, a much greater effort will be needed over the medium term if Guatemala is to overccme the serious backlog in social investment,meet growing recurrent financing requirements for maintenance and operational costs, and provide the basic infrastructureand services needed to support its export diversificationstrategy. xxxvii. The additional resource mobilization effort must also be accompanied by substantial improvementsin the efficiency of resource use and a concerted effort to prepare new programs and projects, especially in the social sectors where the project pipeline is the weakest. In fact, this is the greater challenge. Increasing the availabilityof resources for investment and needed service; may face political obstacles, but can be achieved through a combination of easily identifiableactions to tap domestic and external resources. Improving the design of projects and the efficiency of project execution is much more difficult since it requires not only legal and institutionalchanges, but also changes in the way public sector personnel are trained, motivated, and deployed. CHAPTERIt PUBLIC SECTOREXPENDITURES AND RESOURCEMOBILIZATION
Introduction
1.01 Guatemala, the largest of the Central American countries in terms of population and economic activity, faces major social, political and economic challenges as it strives to consolidate a newly established democratic political framework; improve the well being of some 60 to 70 percent of its population living in poverty; and reestablish a sound macro economic framework for restoring sustained economic growth, following the sharp decline in growth experienced during the first part of the 1980s. These challenges are compounded by serious inequalities in the distribution of income, by the limited and uneven provision of basic social services, and by the country's fragmented social structure. Almost one-half of Guatemala's 8.4 million people are indigenous descendants of the Maya civilizationwith limited assimilation into the socio-economicmainstream. Economic and social integrationhas been made more difficult by the country's rugged topography, the scattered settlement of the Indian population in the Western Highlands, and the fact that only one-fifth of the Indian population speak Spanish, the rest communicating in 23 different Indian languages.
1.02 Guatemala's policy makers face major expenditure allocation and resource mobilization issues in their efforts to more effectivelymeet the basic development needs of the country's rapidly growing population. Although there is general agreement that more resourcesneed to be generated and utilized more efficiently if the backlog of social and other basic development needs are to be fulfilled (what the Government refers to as the "Social Debt"), there are serious questions concerning the amount of additional resources needed, the priorities for public expenditure,and the means to more effectively use public sector resources. This report identifies major expenditure issues and recommends changes in how resources are generated, allocated, and utilized. It is part of an ongoing World Bank effort to support the Government'sefforts to reorganize and strengthen management of the public sector.
1.03 Chapter I reviews the role and impact of public expendituresin meeting the country's development objectives, including patterns and trends in public expenditures,together with an analysis of the principal public sector expenditure issues and projected financing requirementsfor the period through 1991. Specific sector expenditure and investment issues for the Central Government and major decentralizedagencies are covered in Chapters II through VIII. The report concludes with a discussion of planning, project preparation,and project execution issues (Chapter IX). - 2 -
A. Public Expenditure Framework and Recent Trends
Background
1.04 Guatemala's recent public expenditure and investmentperformance, must be viewed within the context of economic developmentsduring the first part of the 1980s, which saw a sharp decline in GDP as the country's external terms of trade deteriorated,internal politicai difficulties mounted, and macroeconomic adjustment efforts were untimely or insufficient. During this period, the uncertain political and economic climate in Guatemala and the rest of Central America resulted in a sharp reduction in private domestic and foretgn investmentas well as external financing, while capital flight was exacerbated. As a consequence,by the middle of the 1980s Guatemala faced serious economic and financial problems: foreign trade was virtually at a standstillowing in large part to an unmanageablemultiple exchange rate regime; inflationwas running over 30 percent; investment and national savings were nearly half the level of the 1970s; arrears on external payments had reached about US$600 million; and GDP was 6 percent below its 1980 level. The sharp decline in GDP and much lower fiscal revenues also prompted a rapid increase in external borrowing, with medium and long-term debt more than tripling to US$2.5 billion by 1987.
1.05 After taking office in early 1986, the new civilian Government moved to stabilize the economy, taking measures to improve exchange rate management, increase interest rates, and reduce the fiscal deficit. These measures, combined with favorable coffee prices, resulted in a substantia'l improvement in economic performance in 1987, with GDP growing by 3 percent, the first real growth in several years. Faced with renewed balance of payment pressures in late 1987 and 1988, the Government took additional stabilizationmeasures in 1987 and mid-1988. Nevertheless, despite its success in stabilizingthe economy, the Government's efforts to improve domestic resource mobilization and accelerate public sector investmenthave been less successful, as discussed in greater detail below.
Trends in Government Expenditure
1.06 Faced with a major decline in tax revenues in the first half of the 1980s, Guatemala drasticallycut public investment and constrained other public expenditures,especially in the social sectors. As a consequence, total public expendituresfell from 17 percent of GDP in 1980 to about 12 percent in 1985. Real per capita Central Government expenditures on health and education, for example, were cut by 60 and 16 percent respectively;public outlays for education averaged only 2.3 percent of GDP in 1980-85 compared with an average of 4.5 percent for all developing countries. Capital outlays were also cut by more than half during the same period, falling from 6.7 to 2.7 percent of GDP, owing in part to the completion of two major hydroelectricprojects and a major port. Central Government recurrent expendituresdeclined by over 1 percent of GDP, reflectingmainly a fall in the wage bill, even though overall public sector employment increased by 13 percent between 1980 and 1985. With the exception of expenditureson defense, the expenditurecuts affected all sectors, with health, transport and education being the ministries hardest hit.
1.07 Since 1986, public expenditureshave begun to recover, with recurrent expendituresoutpacing the recovery in public investment. Recurrent expendituresincreased by 54 and 23 percent respectivelyin 1986 and lSd7, reflecting higher consumption expendituresas well as interest payments on Government bonds, special employment and subsidy programs, and transfers mandated under the new Constitution to the university, judiciary and municipalities. Capital outlays actually fell further in 1986 to 2 percent of GDP as a result of a marked slow down in project execution as the new Government took office and undertook to reassess its investment priorities. Capital outlays rose slightly in 1987 to 2.8 percent of GDP, although actual Central Government capital outlays were about one-half of budgeted amounts. Public investment remained at an estimated 2.8 percent of GDP in 1988, about two-thirds of the original budget reflecting continuing domestic budget constraints and project implementationdelays.
Table 1.1 NonfinancialPublic Sector Operations, 1980-88 (Percentageof GDP)
------__------__------.------Actual ------(Prel.)
1980 1981 1982 1983 1984 198S 1988 1987 1988
A. Current Revenue 12.2 11.3 11.8 10.9 10.4 10.6 11.1 12.2 *2.9 1. Pub. EnterprisesSurplus 0.5 0.4 0.9 1.0 1.1 1.1 1.1 0.8 1.1 2. Taxes and Other Revenues 11.3 10.4 10.6 9.7 9.1 9.2 9.9 10.8 11.2 B. Current Transfers 0.4 0.6 0.1 0.1 0.2 0.3 0.1 0.8 0.6
B. Current Expenditure 10.0 10.2 10.1 9.7 10.1 9.3 10.1 11.2 11.7 1. Wages and Salaries 6.7 6.7 6.6 6.6 6.8 6.2 6.0 6.7 6.7 2. Goods and Services 2.3 2.5 2.2 1.9 2.1 1.9 2.2 2.6 2.8 3. InterestPayments 0.8 0.9 1.1 1.1 1.2 1.0 1.S 1.8 2.1 4. Current Transfers 1.2 1.1 1.1 1.2 1.2 1.2 1.4 1.4 1.6 C. Current Balance 2.2 1.1 1.6 1.2 0.8 1.3 0.9 1.0 1.2
D. Capital Revenues 0.0 0.1 0.2 0.1 0.1 0.0 0.4 0.5 0.2 E. Capital Expenditures 8.7 8.4 8.3 4.8 3.8 2.7 2.0 2.8 2.8 1. Fixed Capital Formation 6.9 7.9 5.9 4.3 3.2 2.8 1.9 2.4 2.6 2. Other Capital Expenditures 0.7 0.6 0.4 0.3 0.6 0.4 0.1 0.4 0.2
C. Overall Balance -4.4 -7.2 -4.5 -3.3 -3.4 -1.3 -0.6 -1.3 -1.4 1. Official Capital Grants 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.9 2. Net Foreign Financing 1.2 1.3 1.2 1.4 0.2 0.2 0.4 0.4 0.0 3. Net Domestic Financing 3.2 6.9 3.3 1.9 3.2 1.1 0.2 0.4 0.8 4. Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.6 -0.4
Source: Ministry of Finance, IMF and World Bank estimates. - 4 -
1.08 Although there is no specific formula for determining the appropriate size or share of Government spending, Guatemala's level of expenditureswould seem to fall on the low side, especiallywhen compared with the range of unmet needs of its population. Central Government expendituresare only about one-half of the level in other countries with a similar level of per capita income (see Table 1.2 below), while social conditions are close to countries with less than one-half of Guatemala's per capita income. Nevertheless,wI'le this implies the need to increase expe3ndituresin key areas, especially the social sectors and basic services, it does not necessarily imply that Guatemala's needs a much larger public sector. As emphasized throughout this report, much can be done through better targeting and allocation of expenditures, strengthening public sector management, and enhancing the involvement of local communities. At the same time, care must be taken to avoid further sharp increases in current expendituresas has recently occurred, unless such expenditures are warranted by improvementsin the productivityof the public sector and by substantial increases in Government services and public investment.
Table 1.2 Central Government Total Expe.nditures and Current Revenues, 1972 and 1986 (Percentageof GNP)
Total Expenditures Current Revenues 1972 1986 1972 1986
All Developing Countries 19 26 16 23
Middle Income 22 28 19 24 G'iatemala 10 in 9 8
Low Income - 21 - 15
Source: World Development Report, 1988 World Bank
Public Sector Revenues
1.09 The low level of public spending results in large part from an equally low level of resource mobilization. Guatemala's tax burden--tax revenues divided by GDP--remains one of the lowest in the world. It declined from a peak of about 11 percent in the late 1970s, to an average of 6 percent of GDP in 1984-85, owing mainly to lower export and import taxes as trade volumes fell, combined with a reduction in the rate and coverage of the value added tax (VAT), first introduced in 1983. With higher coffee prices and the addition of new temporary export taxes (gradually being phased out), the tax burden recovered to 7 percent of GDP in 1986. - 5 -
1.10 Since 1986, the Government has undertaken a number of initiatives to improve revenue performance. These have included the introductionof new temporary export taxes in mid-1986 to absorb part of the windfall profit associated with the gradual unification of the exchange rate, followed by a major tax reform package in late 1987.1 As a result of these adjustments,the tax burden increased to 8.2 percent in 1987 and to 8.8 percent in 1988, with trade taxes growing to about 30 percent of revenues in 1988. Despite this improvement,however, the tax burden is expected to decline gradually to ire-reform levels of 7.8 percent of GDP in 1991, as shown in Table 1.3, unless additionalmeasures are taken, including further strengtheningof tax administration. The projected decline in revenues results largely from the Government'sexport promotion policies, as a consequence of whic:.both temporary export and import taxes are being gradually phased out. Additional details of the 1987 tax reform are provided in Annex I.
Table 1.3 Central Government Revenue, 1987-91 (PercentageGDP)
Est. Prel. ------Projected ------1987 1988 1989 1990 1991 Tax Revenues 8.2 8.8 8.5 8.0 7.8 Direct taxes 1.6 2.2 2.4 2.4 2.4 (income tax) (1.4) (1.9) (2.1) (2.1) (2.1) Indirect taxes 6.6 6.6 6.1 5.6 5.4 VAT 2.3 2.4 2.4 2.4 2.3 Export 0.9 0.7 0.3 0.0 0.0 Import 1.6 1.9 1.8 1.6 1.5 Other 1.8 1.6 1.6 1.6 1.6
Source: Ministry of Finance and World Bank estimates
1.11 A major cause of Guatemala's poor revenue performance, is tax evasion, which is reportedly extremely high owing mainly to lax tax administration. Although there is no hard evidence to indicate the degree of tax evasion, it is interesting to note that Guatemala's income tax rates are similar to or even higher than in other countries. Nevertheless, its income tax yields only a small fraction of the revenues obtained elsewhere (see Annex I). Income tax actually paid in 1986 represented only 1.4 percent of corporate gross income and 3.4 percent of personal gross income. Administration of the VAT is equally poor, with many firms failing to turn in VAT receipts to the treasury and the treasury unable to provide VAT refunds to eligible taxpayers. The situationwith other taxes is also gloomy: property taxes collected reflect only a small portion of market values, despite recent efforts to improve the register and valuation of
1/ The 1987 tax reform: (i) reduced top marginal income tax rates and the number of tax brackets; (ii) closed some talxloopholes; (iii) limited tax deductions; (iv) introduced advance tax payments (pagos a cuenta) for corporate income tax; and iv) increased import tariffs by 4 percent. The latter tariff increase will be gradually reduced to 1 percent by 1992. - 6 - properties, including a self-valuationsystem (autovaluo);gift and inheritance taxes are widely avoided via trusts; taxes on idle land are seldom enforced; and selective consumption taxes introduced in 1985 are not being applied as a result of privaEe sector complaints that they constituted double taxation with the VAT and were therefore unconstitutional.
B. Future Expenditure Options and Financing Requirements
1.12 Since Guatemala's present level of resource mobilization and public expenditure is too low to satisfy the population'sbasic needs and meet the country's requirements `or improving and expanding basic infrastructureto support growth objectives, the Government faces three basic options.
First, improve the capacity of the public sector to utilize resourcesmore efficiently, ircluding reallocatingresources to better meet investment and :-ecurrentexpenditure requirements in key areas, while acceleratingefforts to mobilize additional domestic resources coupled with a judicious use of additional external assistance.
Second, sharply increase external borrowing to make up for shortfalls in internal resource mobilization.
Third, pursue more limited growth1and expenditure objectives.
Both the second and third options raise serious questions. There are clearly limitationson Guatemala's external debt servicing capacity, while undue dependence on external resources is risky and not advisable. At the same time, further limiting the low level of investment and expenditure on basic services would undermine the country's ability to increase growth and address underlying social constraintswhich are critical for maintaining social and economic stability. As a consequence,this report argues that Guatemala's only real choice is to follnw option number one, namely to increase domestic resource mobilization,while making judicious use of additional external assistance, and at the same time addressing the serious institutionaland managerial bottleneckswhich limit the capacity of the Government to use and allocate resourcesmore efficiently.
1.13 Increasing expenditureson public services and essent!al infrastructuredoes not mean that the size of the public sector must he expanded. Indeed, the first priority should be to use available resources more effectively. What it does mean is that a larger share of resources should be allocated for investment and basic services in health and education, for example, while reducing overstaffingand minimizing unnecessary expenditureson general administration. At the same time, the Government should explore ways to minimize demands on the Central Government purse. This implies continued efforts to increase local community participation in the planning and financing of local development needs, while also facilitatingthe expansion of on-going NGO sponsored development efforts. In addition, productive investmentswhich directly benefit large scale private commercial interests, such as major irrigation schemes for large-scale farmers, could be financed directly by the private sector.
1.14 The overall goal should be to adequately finance public services and investment in those sectors and areas where private investment cannot effectively operate or where public interest clearly outweighs private concerns. It seems clear that in such areas as health, education, low income housing, water supply and sanitation, road irfrastructure,and agriculture services, especially for the small and medium sized farmers, that strong public sector involvement is essential. It is much less clear in such areas as telecommunicationsand power, for example, where private sector financing of investment is more feasible. Although issues of privatization go well beyond this report, the Government may need to consider whether certain services could not be more cheaply and effectively supplied by the private sector, with Government participation restricted to the important role of maintaining an adequate regulatory environment.
1.15 The following paragraphs analyze the projected level and composition of public sector expendituresover the short-term (1989-1991) and recommend adjustments in the expenditure pattern and level of public expenditures to be achieved over the medium-term,perhaps by 1995. This is followed by an analysis of financing requirementsfor the period through 1991, within the context of a medium-term economic projection scenario for achieving renewed growth.
Level of Public Expenditures (1989-1991)
1.16 Projections of total spending for the consolidatedpublic sector for the period 1989-91 (Table 1.4 below) show a slight increase over the period, with expenditures increasing from 14 percent of GDP in 1987 to about 14.5 percent in 1988 and to about 17 percent in 1989 through 1991. This increase in total expendituresassumes a further resource mobilization effort and improvements in execution of the investment program. Within this overall total, current expendituresreached 11.2 percent of GDP in 1987, increased to 11.7 percent in 1988, and are projected to average 12.3 percent through 1991. Investment expenditures ::eachee.only 2.8 percent of GDP in 1987, and preliminary estimates indicate a similar level for 1988. However public investment levels are projected to increase to an average 4.5 percent of GDP through 1991, assuming substantial additional domestic revenue mobili7ation as well as major improvementsin execution of the public sector investment program. - 8 -
Table 1.4 Public Sector Expendituresby Category (1980-1991) (Percentageof GDP)
------Actual ------Prel. *.-- Projected --- 1980 1984 1986 1987 1988 1989 1990 1991
Current Expenditures 10.0 10.1 10.1 11.2 11.7 12.5 12.4 12.2 of which wages and salaries 5.7 5.6 5.0 5.7 5.7 5.8 5.7 5.6 goods and services 2.3 2.1 2.2 2.6 2.3 2.3 2.3 2.3 interest payments 0.8 1.2 1.5 1.6 2.1 2.3 2.2 2.2 current transfers 1.2 1.2 1.4 1.4 1.6 2.2 2.2 2.2
Capital Expenditures 6.7 3.8 2.0 2.8 2.8 4.4 4.7 5.01
Total Expenditures 16.7 13.9 12.1 14.0 14.5 16.9 17.1 17.2
1/ Includes additional unidentifiedinvestment of 0.4% of GDP Source: Statistical Appendix, Table 1.12
1.17 The proposed overall levels of spending are adequate provided the capital expenditure target is achieved. If Guatemala is to adequately meet its social and basic infrastructurerequirements, it cannot continue to maintain public sector investmentlevels of less than 3.0 percent of GDP. Urgent efforts are thereforeneeded to ensure that the minimum 4.5 percent of GDP target is indeed achieved in the next few years, increasing to 5.0 percent in the early 1990s. In fact, the level of 5.0 percent of GDP still falls below average investment levels in other middle income countries in which public investment is in most cases over 6 percent of GDP.
Composition of Public Expenditures (1989-1991)
1.18 As indicated in Table 1.5 below, the share of current and capital expendituresfor the consolidatedpublic sector is projected to be about 73 and 27 percent respectivelyfor the 1989-91 period, assuming that projected levels of investmentare actually achieved. The share of wages and salaries for the same period is expected to average about 33 percent of total expenditures,with about 14 percent on average allocated for other goods and services, 13 percent for interest payments and 13 percent for transfers. Although cross country comparisonsmust be treated with caution as data is not strictly comparable, this spending pattern shows that Guatemala allocates a higher share to wages than other middle income countries, while current transfers are considerably lower. Since the quantity and coverage of public services provided does not appear very extensive, the very high share accorded to wages (even higher in earlier years) would seem to reflect low productivityin the public sector together with an inappropriatemix of skills, while also indicating that the Government is acting as an employer of last resort. Table 1.5 Public Sector Expendituresby Category (1980-1991) (Percent of Total)
Other actual ------Prel. --- Projected --- Middle 1980 1984 1986 1987 1988 1989 1990 1991 Incomel/
Current Expenditures 60 73 8'. 80 81 74 73 73 77 of which: Wages and Salaries 34 40 41 40 40 34 33 33 23 Goods and Services 14 15 18 18 16 14 14 14 13 Interest Payments 5 8 13 11 14 13 13 13 7 Current Transfers 7 9 12 10 11 13 13 13 34
Capital Expenditures 40 27 16 20 19 26 27 27 23
1/ World Development Report, 1988, World Bank. Based on 1980 data for Middle Income Countries. Source: Ministry of Finance and World Bank estimates
Composition of Public Sector Investment (1988-91)
1.19 As summarized in Table 1.6 below, infrastructureinvestments, given their large capital requirements,are expected to continue to account for the largest share of public sector investment expenditure. The share of infrastructureout of total capital investments increases from about 40 percent in 1988 to close to 60 percent in 1990 and 1991, owing mainly to projected higher investments in power and telecommunications. Investments in the social sectors (health, education, housing and urban development-- including the 8 percent transfer to the municipalities)accounted for an estimated 36 percent of investment in 1988 and are projected to account for about 30 percent of investment in 1989, but fall to about 24 percent of total investment in 1990 and 1991, reflecting in part a weak project pipeline in health and education, as well as the completion of heavy investments in hospital equipment planned during 1988 and 1989. Agriculture investment is projected to average about 13.5 percent of total public sector investmentover the period. - 10 -
Table 1.6 Public Sector Investment Program, 1988-1991 1/ Percentage Share by Sector (Percent of Total)
Est. ------Projected ------1988 1989 1990 1991
Social Sectors 36.0 30.4 24.2 23.8 Education 3.1 4.1 2.7 3.1 Health 11.7 8.1 3.3 3.0 Housing and Urban Dev. 21.2 18.2 18.2 17.7 of which 82 to Municipalities (13.6) (9.5) (9.6) (10.6)
Infrastructure 41.0 49.4 56.9 58.8 Transport 10.5 16.6 13.4 10.9 Water Supply 9.9 6.8 5.6 7.9 Communications 8.8 12.6 13.0 15.3 Power 11.8 13.4 24.9 24.4
Agriculture 13.7 14.0 13.5 13.0
Other 9.0 6.0 5.1 4.5
1/ Excludes estimated expenditureson credit for housing and agriculture, except Central Government transfers from external loans.
Source: StatisticalAppendix, Table 2.9.
1.20 The relatively small size of Guatemala's public investment effort becomes clearer when the planned investment effort is analyzed in terms of GDP as shown in Table 1.7. Total programmed investment for the period 1989-91 averages about 4.5 percent of GDP, of which about 40 percent is allocated for power and telecommunications. The shares of GDP allocated to expenditures for water supply and sanitation, as well as for education and health remain quite low. - 11 -
Table 1.7 Public Sector Investment Program, 1988-91 Share of GDP by Sector (Percent of GDP)
Est. ------Projected-
1988 1989 1990 1991
Social Sectors, of which: 1.0 1.4 1.2 1.0 Education 0.1 0.2 0.1 0.1 Health 0.3 0.4 0.2 0.1 HousinglUrban 0.2 0.4 0.4 0.3 Municipal Transfer (8Z) 0.4 0.4 0.5 0.5
Infrastructure,of which: 1.1 2.1 2.7 2.8 Water Supply 0.3 0.3 0.3 0.4 Transport 0.3 0.7 0.6 0.5 Power 0.3 0.6 1.2 1.2 Telecommunications 0.2 0.5 0.6 0.7
Agriculture 0.4 0.6 0.6 0.6 Other 0.3 0.3 0.2 0.2
2.8 4.4 4.7 4.6
1/ Excludes credit for housing and agriculture,except Central Government transfers from external loans. Source: Statistical Appendix, Table 2.9.
Improving the Allocation of Public Expendituresin the 1990s
1.21 Within the expenditure levels indicated above, there are a number of adjustments in the composition and allocation of expenditureswhich would improve the Government's ability to meet its development priorities and improve the efficiency of resource use. With respect to current expenditures, the principal focus should be on reducing the relatively high share allocated for salaries and wages, while increasing expenditureson the goods and services needed to effectively implement and maintain key Government services and programs, such as the adequate provision of supplies for schools and health care facilities. Restricting expenditures on wages requires a careful review of personnel and job requirementsas well as efforts to eliminate considerableoverlap and duplication of functions which occurs throughout the public sector. In addition, there are serious overstaffingproblems, especially in the decentralized agencies. The recently initiated job regrading and reclassification exercise is a step towards resolving these problems and should be fully supported. At the same time, considerable effort is needed to provide the training and skills needed to increase the very low productivityof the public sector. A smaller, but more highly skilled and better paid public - 12 -
sector work force, would reduce the heavy burden on wages and salaries, thus freeing resources for productive services and investment. These are not new issues and none entail easy solutions. Nevertheless, these broader public sector management issues need increased attention.
1.22 The sector by sector analysis also confirms the need for changes in the pattern and orientation of public sector investment to more closely match Guatemala's medium term developmentneeds and national priorities. Of particular concern is the declining share of investment projected for the social sectors, especially health and education and the inadequate level of investment programmed for water supply and sanitation, although this would increase assuming a portion of the 8 percent transfer to the municipalities is used for water and sanitation investment. Although the allocation of public investment will continue to have a heavy infrastructurecomponent, given the capital intensive nature of investment in power and telecommunication,the Government'smedium term objective should be to: Ci) increase the share of investment in the social sectors (health, education, housing and urban development)to at least 30 percent (it falls to about 24 percent in 1990 reflecting a weak project pipeline); (ii) increase the share of investment in water supply from about 7 to at least 10 percent; (iii) reduce the share allocated to other infrastructure (transport,power, telecommunications)to about 40 percent, and (iv) keep agriculture at about 10-12 percent, assuming that major irrigation projects are financed by the private sector.
1.23 In terms of GDP, the recommended shares of investment by sector are shown in Table 1.8. While these adjustmentsmay not be feasible in the short-term, a major effort is needed to improve the balance in the program between investmert in the social sectors and infrastructure. To do this the share of investment in the social sectors should be increased by about 60 percent to about 1.7 percent of GDP, thus making possible increases in health, education and municipal development/housing,while keeping the total share allocated to infrastructureat about the same level of 2.7 percent of GDP. At the same time, however, the compositionwithin the infrastructurearea should be shifted to permit an increase in water supply investment from 0.3 to between 0.5 and 0.6 percent of GDP, while reducing slightly power and telecommunicationsfrom 1.8 to 1.6 percent of GDP. The share allocated to agriculturewould be reduced slightly given private sector funding of large scale agrictlture. Although additional heavy investment in the power sector in the middle 1990s would likely require an increasing share of GDP, this should be accommodatedby increasing the overall level of public investment rather than penalizing investment in the social sectors. The proposed increase in investment in the social sectors would need to be accompanied by a major effort to improve the efficiency of resource use, while also ensuring that expendituresare carefully targeted to reach those sectors of the society where needs are the most urgent. - 13 -
Table 1.8 PublicInvestment by Sectoras Shareof GDPI (Percentof GDP)
Estimated Projected Recommended Expenditure Average Expenditure MediumTerm by Sector (1988) by Sector (1990-91) Target (1992-95 (% of GDP) (%of GDP) (% of GDP)
Social Sectors, of which: 1.0 1.1 1.7 Health (0.3) (0.2) (0.4) Education (0.1) (0.1) (0.3) Housing/Urban (0.2) (0.3) (0.6) Municipal(8%) (0.4) (0.6) (0.6) Infrastructure 1.1 2.7 2.7 of whichTransport (0.3) (0.6) (0.6) WaterSupply (0.3) (0.3) (0.6) Power (0.3) (1.2) (1.0) Telecommunications (0.2) (0.6) (0.6) Agriculture 0.4 O. 0.6 Other 0.3 0.2 0.1 2.8 4.e 6.0
I/ Excludes credit lines for housing and agriculture,except central Government transfersfrom externalloans. Source: StatisticalAppendix, Table 2.9 and WorldBank estimates
Financing Requirements and Sources
1.24 As shown in Table 1.9 below, 75 percent of financing requirements would be met from available domestic resources and another 5 to 6 percent from already available external resources, leaving a financing gap of about 3 to 5 percent of GDP for each of the years 1989 through 1991. A portion of this gap would be met from new external commitments (including grants) assuming the contracting of these resources is expedited. The remaining gap of about 2 percent of GDP could be met through increased domestic resource mobilization, including improvementsin tax administration,other tax reform measures, and increases in public utility tariffs and other user charges. Alternatively, a portion of this gap could be filled with additional external grant financing. However, continued undue reliance on grant financing is risky since it is unlikely to be available over the medium term. We therefore recommend that the gap be filled through increased domestic resource mobilization rather than postponing such action by seeking additional external grant assistance. - 14 -
Table 1.9 Non-Financial Public Sector, Uses and Source of Funds, 1988-1991 (Percentageof GDP)
Prel. ------Projected ------1988 1989 1990 1991
Uses 16.7 19.6 19.3 19.1 Current Expenditure 11.7 12.5 12.4 12.2 Capital Expenditure 2.8 4.4 4.7 5.0 Loan Amortization 2.2 2.7 2.2 1.9
Sources 17.6 16.3 15.1 14.4 Current Revenues 12.9 13.1 12.4 12.2 Capital Revenues 0.2 0.1 0.1 0.1 Domestic Credit 2.3 1.6 1.4 1.3 Ongoing External Loans 2.2 1.5 1.2 0.8
Additional Financing 0.9 3.3 4.2 4.7 Grants 0.9 1.0 0.9 0.8 New External Loans1 - 1.5 1.5 1.9 Unidentified - 0.8 1.8 2.0
1i Includes counterpart of balance of payments support. Source: StatisticalAppendix, Tables 1.12 and 2.11
Domestic Resource Mobilization Needs
1.25 The first priority should be to strengthen tax and customs administrationas part of the program of restructuringwhich the Ministry of Finance is initiating. Annex I analyzes a number of measures which, if adopted, would both facilitate tax administrationand could lead to higher revenue collections. However, the revenue impact of stricter tax enforcement is unlikely to materialize in the shortrun. As such, the effort to reform tax administrationwill need to be accompanied by additional tax measures.
1.26 There are a number of tax measures which the Government could consider as part of a future tax reform. These include inter alia: i) increasing the VAT rate and coverage; and ii) introducing selective consumption taxes on luxury goods and services.2 Since taxes on trade discourage export growth and are subject to internationalmarket fluctuations,the design of new tax measures should be consistent with the country's efforts to promote export growth and should continue efforts to rely more heavily on domestic consumption taxes, which would also improve the equity and efficiency of the tax regime. In addition, tax measures
2/ A three percentage point increase in the VAT rate (presently at 7 percent), for example, would increase tax revenues by the equivalent of 1 percent of GDP. - 15 - should also be designed with a view of minimizing tax administration problems given existing difficulties in tax administration. Taxes with relatively simple administrativerequirements should therefore be given greater consideration.
1.27 Another major area for improved resource mobilization is in the area of public utility pricing and user charges. INDE poses the major problem. Even assuming that electricity rates are adjusted in line with inflation in the next three years, INDE will not be able to service its external debt obligations let alone contribute to finance its investment. After trimming down its investment program.,to the minimum required, INDE's financing gap could average about 0.5 percent of GDP in the next three years (or about one-fourth of the overall financing gap). There is therefore a urgent need to strengthen INDE's financial position as argued in Chapter III.
1.28 Tariff adjustments in other sectors are also needed. As regards the other major public enterprise,GUATEL, Chapter V recommends revising the domestic tariff structure as a means of improving the efficiency of telecommunic"tionsservices and raising additional revenues. Chapter VI stresses the need to implement adequate cost recovery policies in the water and sewerage sector, including increasing water tariff levels and reforming the antiquatedwater title system. Finally, Chapter VII discusses the need to increase university tuition, while protecting the access of the poor to higher education through wider use of fellowships,thus releasing resources for primary education. Additional recommendationsto increase the efficiency of public sector operations are summarized in Chapter IX.
1.29 In addition to the resource mobilization effort discussed above, the GovernrAentmay also need to consider privatizing certain public services as well as taking other actions to attract private investment into productive and service activities where public investment may not have a clear comparative advantage. At the same time, the use of available public resources would have to be maximized through better targeting and improved management.
External Financing of Public Investment
1.30 Public sector investment programmed for the next three years remains heavily dependent on the availabilityof foreign financing (see Table 2.9). Looking at the 1989-1991 investment program as a whole, almost 50 percent of the investment program is expected to be financed with external resources, including external resources utilized for local cost financing. External participation is particularly high in certain sectors, with external resources expected to finance about 78 percent of investment in water supply, 66 percent in education, 62 percent in health and 60 percent in transport. Use of external grant funds, mainly for financing local counterpart requirementshas also increased in recent years, with grant funds programmed to finance almost 12 percent of total Central Government direct and indirect investment in 1988.
1.31 In addition to financing the public sector investment program, external grants are also being used to finance recurrent costs. External grants were expected to finance about 4 percent of the Central Government's current expenditure budget in 1988. Since grant financing is unlikely to - 16 -
continue at high levels over the medium term, continued reliance on such financing, especially to cover recurrent costs, is risky. It would be preferable to allocate grant funds to the investmentbudget, particularly to the social areas where the possibility of cost recovery is always more limited.
Public Savings, In7estment and Growth (A Macro-economic Scenario)
1.32 The economic projections summarized in Table 1.10 below, and discussed in greater detail in Annex II, constitute a high case scenario. They confirm the importance of a stepped up public and private sector investment effort if Guatemala is to achieve GDP growth averaging between 4 and 5 percent per annum, which is considered the minimum needed to begin making up for the sharp deterioration in Guatemala's economy in the 1980s. In fact, even with GDP growth averaging between 4 and 5 percent per annum, Guatemala would still require about ten years to return to its 1980 level of per capita GDP, assuming that population growth averages about 2.7 percent per year.
1.33 The high case scenario assumes that gross fixed investmentwould need to grow gradually from 14 percent of GDP in 1988 to 19.5 percent in 1995. This increase in investmentwould result from both the gradual recovery of private fixed investment (from 11 percent of GDP in 1988 to 14.5 percent in the 1990s), as well as the proposed increase in public sector investment (from 2.8 percent in 1988 to 5 percent in 1992 and thereafter).3 This would require not only continued domestic stability, but also effective policies to promote exports, a significant strengthening of public sector implementationcapacity and continued access to external credit. Foreign direct private investmentwould also have to make a significant contribution,averaging about US$100 million per year, or 10 percent above the 1987-88 level. To realize this level of foreign investment, the country would need to provide foreign investors with a stable social, political and macroeconomic environment. The projections also assume a substantial improvement in domestic savings which increase from 8 percent of GDP in 1988 to 18 percent in 1995. This savings effort would not only require continued austerity in public expenditure policies, but also a significant effort to increase public savings from 1 percent in 1988 to 2.5 percent in the 1990s, as well as improved incentives for private savings through realistic interest and exchange rate policies. The level of savings required is essential if the additional growth in the economy is to be achieved without an unsustainable level of external borrowing.
3/ The projections assume that the rate of execution of the public sector investment program would increase to 80% and 90X in 1989 and 1990 respectively. - 17 -
Table tj1
Key Economic Indicators (Hiah Case Scenario)
Act. Prel. Projected
1987 1988 1989 1990 1991 1992 1993 1994 1995
Growth Rates (percent):
CODP...... 1%1...... 3.5% 4.0% 4.0% 4.5% 4.5% 6.0% 5.0% 5.0%
CDP per capita 0.3...... 0.3% 0.7% 1.2% 1.4% 1.9% 1.9% 2.3% 2.3% 2.3%
Debt Indicatrors :
MLT DOD (Million USS) a/ 2,627 2,627 2,434 2,944 3,315 3,611 3,891 4,222 4,538 4,817 MLT DOD/Exports O&S (%) 224.9 185.6 194.8 194.5 188.1 181.0 174.7 166.2 1l5.7 Debt service MLT/Exports GAS (S) b/. 44.2 41.4 27.9 28.4 29.9 28.5 29.4 29.8 28.3
Interest MIL/Current CDP (S) 2...... 2.? 2.6 3.0 3.1 3.1 3.0 2.8 2.6
National Accounts as % of current OP:
Total Inveatment 1 3 ...... 13.8 14.1 :5.5 16.5 17.5 18.6 19.5 19.5 19.5
Public Investment r/ 2.8 2.8 3.5 4.2 5.0 5.0 5.0 5.0 5.0
Private Investment 11...... 11.3 12.0 12.3 12.5 13.5 14.5 14.5 14.5
Domestic Savings 7...... 8.0 10.0 11.9 13,7 15.3 16.8 17.2 17.7
National Savings ...... I ...... 5.9 6.9 8.6 10.1 11.8 13.4 15.0 15.6 16.2
Public Savings d/ 1.0 1.2 0.6 1.3 2.0 2.5 2.5 2.5 2.5
Private Savings 4.9 5.7 8.0 8.8 9.8 10.9 12.5 13.1 13.7
Foreign Savings 7.9...... 7.2 6.9 6.4 5.7 5.1 4.5 3.9 3.3 ICOR.. I ...... 3.5 3.9 3.4 3.7 3.5 3.7 3.5 3.7 3.7
External Trade Indicators (percent):
Exports G'FS real growth rate 6.0...... 4.2 9.0 8.8 8.6 7.6 7.9 8.1 8.3
Exports GNFS nominal growth rate .. 10.5 16.9 20.2 18.3 18.9 17.4 17.0 16.1 16.3
MELAS (incl. NFS) 15...... 1.5 1.0 1.1 1.1 1.1 1.1 1.1 1.1
Resource Balance/Current GDP -6.5...... -6.1 -5.5 -4.6 -3.8 -3.2 -2.7 -2.3 -1.8
Terms of Trade Index (1987 - 100) .. 100.0 103.3 103.4 104.4 105.6 106.5 106.9 106.3 105.7
a/. Includes use of IMF credit, refinancing, accumulated debt service arrears end bonded arrears. b/. Includes bonded arrears and refinancing. Calculated on accrual basis. c/. Assumes 80%, 90% and 100% execution of the capital budget in 1989, 1990 and 1991, respectively. d/. Assumes that fiscal gaps In 1990 (1.3%), 1991 (2.0%) and 1992-95 (2.5%) will be covered by higher fiscal savings.
S 1.34 To achieve the projected level of growth, Guatemala will require substantial financial support in the next few years, as shown in Table 1.11. The scenario assumes that official grants (mostly from the United States) would average about US$90 million per year, which is in line with recent trends. Gross disbursements from financial institutionswould average about US$75 million (including the roll-over of existing obligations). With respect to bilateral lending, gross disbursements from the existing pipeline are projected to average about US$30 million per - 18 - year. Nevertheless, even with this level of external assistance, coupled with a sharp increase in gross disbursementsfrom multilaLeral institutions (which would increase from about US$100 million in 1988 to an average of US$200 million per year, including quick disbursing loans), the projections show a large unfinanced gap of about US$280 million per year. About one- third of this gap could be filled by supplier credit to the private sector, while the remaining US$180 million would have to be financed with additional assistance from bilateral or other sources. Failure to secure these additional resourceswould most likely result in a fall in GDP growth, with annual GDP growth not expected to surpass 2.9 percent (down from an average 4.6 percent in the high case scenario),with marginal gains in per capita income. Toble 1.11 L t Financing Requirements (High Case Scenario) (Millions of US$) Act. Pre. Projected 1987 1988 1989 1990 1991 1992 1993 1994 1995 Financing Requirements (net) (563) (567) (50) (S82) (555) (535) (515) (496) (460) Official Grants (incUSAID) 126 104 100 100 95 90 85 80 80 Direct Foreign Investment 91 90 90 100 100 100 100 100 100 Multilaterals (29) 21 147 68 61 70 46 42 30 World Bank (10) (24) 87 32 33 32 31 20 11 IDB and Others (19) 45 59 36 27 37 15 21 19 Bi laterals (83) (8) (38) (12) (12) (2) 6 3 7 Suppliero Credit 0 0 6 6 7 (4) (4) (4) (4) Financial Institutions (59) (15) 51 53 48 48 29 16 12 Stabilization Bonds (22) (76) 0 0 0 0 (37) (37) (37) Debt Service Arrears 221 (121) (267) 0 0 0 0 0 0 Refinancing 46 121 267 0 0 0 (8) (26) (26) Unidentified Financing 0 0 293 266 257 C23 298 322 297 Other Sources a/ 272 451 (60) 0 0 0 0 0 0 a/ Includes private capital, errors and omissions and changes ;n foreign exchange reserves. Source: World Bank estimates 1.35 With respect to debt service requirements,the scenario shows an improvement in all debt indicatorsby the mid-1990s. The total long term external debt-to-exportsratio would decline from about 186 percent in 1988 to 156 percent in 1995. The debt service ratio (after refinancing)would decline from 41 percent in 1988 to 28 percent in 1995. Interest payments on medium and long term debt would peak at 3.1 percent of GDP in 1991-92 and decline below 3 percent in 1995. - 19 - Growth, Domestic Savings, and External Debt 1.36 Although Guatemala's existing debt burden is still ,nanageableby Latin American standards,with interest payments (after refinancing)still close to 3 percent of GDP, further external borrowing must be accompanied by a strong domestic savings effort to ensure adequate resources for economically sound projects while minimizing dependence on outside resources. As indicated in Table 1.12, if GDP growth is kept at 4 to 5 percent per year as in the high case scenario, but domestic savings are held at the present depressed level (about e percent of GDP in 1988), Guatemala's current account deficit would reach over US$2.0 billion in 1995, with its accumulated external debt surpassingUS$ 10 billion in the mid-1990s, the debt service ratio jumping to 51 percent, and interest payments absorbing nearly 6 percent of GDP. These results underscore the importance of pursuing a balanced approach which would encourage increased domestic savings, while keeping additional external debt to the minimum needed to help achieve the desired rate of growth. 1.37 Increased domestic savings would come from both public and private savings efforts. Public sector savings would need to increase from about 1 percent of GDP in 1988 to 2.5 percent in the early 1990s, which would still be below the levels of the late 1970s. To reach this minimal target, while also keeping current expenditure growth in line, the Governmentwould need to i) strengthen tax administration significantlywhile also enforcing existing tax laws; ii) further adjust the price of public services, especially electricity; and iii) introduce additional tax measures which would penalize luxury consumption rather thatiexports (see paras. 1.26 to 1.28). With respect to private savings, they would need to increase from about 6 percent to 14 percent of GDP, thus reaching about the level of the late 1970s. Maintenance of a stable macroeconomic environment together with realistic exchange and interest rate policies would be necessary to promote the recovery of private savings and ensure that they remain at home. - 20 - TABLE 1.12 LOW DOMESTICSAVINGS SCENARIO, 1988-96 Projected 1988 1989 1990 1991 1992 1993 1994 1995 ANNUAL GROWTH RATES (in percent): ______ GDP 3.6 4.0 4.0 4.6 4.6 6.0 6.0 6.0 Consumptionper capita 1.2 5.8 1.4 1.8 1.9 2.3 2.1 2.1 INVESTMENT-SAVING(as percent of GDP): ------Total Investment 14.1 16.6 16.6 17.6 18.6 19.6 19.6 19.6 Domestic Saving 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 National Saving 8.9 8.5 6.9 5.3 4.6 4.1 3.8 3.2 Foreign Saving 7.2 9.0 10.8 12.2 13.9 16.4 15.9 18.3 EXTERNALDEBT: MLT DOD (USS million) 2,434 3,123 3,884 4,820 6,028 7,620 9,462 11,676 MLT Debt Service (%) 41.4 28.6 30.6 34.3 36.7 41.0 48.2 61.0 MLT Interest/GDP(%) 2.3 2.7 3.4 3.9 4.6 6.1 6.6 6.9 Source: World Bank estimates. Private Funding for Development 1.38 Non-governmentalorganizations (NGOs) as well as other private voluntary organizationshave played and continue to play an increasingly important role in helping meet Guatemala's urgent development needs, as analyzed in greater detail in Annex III. Based on a preliminary survey of NGO activities, the NGO contributionto development activities is significant,reaching a projected level of 0.5 percent of GDP in 1988. Recognizing the important contributionwhich NGOs can make in designing and operating development programs targeted at the urban and rural poor, the Government has initiated a number of developmentprograms which work -with or promote NGO development activities. Moreover, the Government is currently considering ways to provide additional financial support to NGOs as part of the proposed Social InvestmentFund. One particular area where a stronger partnershipwith NGOs would be useful, would be in helping strengthen the limited capacity of most municipalitiesto more effectively utilize the 8 percent share of ordinary revenues now being allocated to them under the Constitution for capital investment. There is ample room for NGOs to play a constructive role in helping prepare and execute development projects and programs that serve local needs. Conclusions and Principal Recommendations 1.39 The additional public sector resource mobilization and savings effort of about 2 percent of GDP recommended above, constitutes the minimal effort needed if Guatemala is to begin to seriously tackle its basic - 21 - development challenges. Given the country's current low tax ratio, this effort should not represent a major sacrifice or burden. Indeed, a much greater effort will be needed over the medium term if Guatemala is to overcome the serious backlog in social investment and meet growing recurrent expenditure requirements,especially in health and education, but also for rnaintenanceof basic infrastructure. At the same time, the additional resource mobilization effort must be accompanied by substantial improvementsin the efficiency of resource use and a concerted effort to prepare new programs and projects, especially in the social sectors where the project pipeline is the weakest. Increasing the availabilityof resources for investment and needed services may face political obstacles, but can be achieved through a combinationof easily identified actions to tap domestic and external sources. Improving the efficiency of project and program design arl management and removing the bottlenecks to timely execution of urgently needed public Livestment is much more difficult since it requires not only legal and institutionalchanges, but also changes in the way public sector personnel are trained, motivated, and deployed. These important managerial and institutionalissues are discussed in greater detail in subsequent chapters highlighting specific sectoral issues affecting expenditure and investmentperformance. - 22 - CHAPTER II: AGRICULTURE SECTOR Introduction 2.01 Agriculture remains Guatemala's most important sector, accounting for one-fourth of GDP and two-thirds of export income and employing over one half of the labor force. Unequal access to land, disparities in education, cultural differences and insufficienttechnical assistance and credit to small farmers have resulted in a highly dualistic structure of agriculture. As such the sector comprises both traditional, subsistence level agriculture as well as modern, export oriented production. Traditional subsistenceagriculture is concentrated in the highlands (altiplano),particularly the Western highlands. The Pacific slopes and the lowlands, on the other hand, are primarily dedicated to export crop production, mainly in large farms with fertile soils, with greater access to credit and infrastructure. The least cultivated areas are in the northern region (El Peten) where access is difficult, but where there is scope for expansion of the agricultural frontier, provided adequate attention is paid to environmentalconcerns in the area. 2.02 While poverty is common throughout rural Guatemala, it is most pervasive in the small holder highland areas, which have a predominantly Indian population. At least a third of the country's population lives in the highlands and adjacent rural poverty centers. Farming, on plots that now average less than 1.4 hectares in size, consists mainly of subsistence production of maize, beans, and livestock, with family incomes augmented through handicraft production and seasonal employment on commercial farms in the lowlands. The absolutely landless--nowmore than 30 percent of the population in these poverty areas--competefor these earnings. Population pressure, dependence on firewood for fuel, and poor grazing and farming practices have devastated the highland ecology. Nevertheless,while highland climates, soils, and water availabilityvaries considerably,there are high potential areas where production and earnings can be increased substantiallywith good extension assistance, the introductionof small scale irrigation,better soil conservation, and crop diversification, especially for export markets. Sectoral Organization 2.03 The institutional framework in the Agriculture sector includes the Ministry of Agriculture itself, plus four major decentralizedagencies. These include: the Institute of Science and Agriculture Technology (ICTA), which is responsible for agriculture research and related education and training program development; the National Agricultural Marketing Institute (INDECA),which regulates prices of basic grains through its marketing operations; the National Institute for Agrarian Transformation (INTA) which is involved in land titling, land purchase, and settlement schemes; and the National Bank for Agricultural Development (BANDESA),which provides credit to small, medium and large farmers. The Ministry itself is divided into four basic operational units: i) General AdministrativeServices, which is responsible for the overall administrationof public services in agriculture, including agriculture sector planning and programming (USPADA); ii) the Directorate General of Agricultural Services (DIGESA), - 23 - which has responsibilityfor programs to improve production, transfer new technology and provide assistance to producers; it has three divisions- -irrigation and drainage, seed and plant development,and plant protection and control; iii) the DirectorateGeneral of Livestock Services (DIGESEPE), with responsibilityfor management of programs to improve livestock production; and iv) the DirectorateGeneral for Forests and Silviculture (DIGEBOS), with responsibilityfor promoting the conservationand balanced use of the nation's forests. This latter directorate has only recently been established, taking over from INAFOR, a decentralizedagency which has now been closed, but which previously handled forestry activities. The Agriculture Sector is divided into eight geographical regions with each of the principal sector entities operating regional offices. 2.04 As indicated in Table 2.1, the two largest entities are the Ministry of Agriculture itself and BANDESA. The remaining entities are relatively small institutions. Moreover, as indicated above, INAFOR has now been closed and incorporatedinto the Ministry. Table 2.1 Agriculture Sector Budget, 1986-88 (Q Million) 1986 1987 1988 (aclual) (planned) (Programmed) Ministry of Agriculture 93.9 112.4 165.5 INTA 8.7 9.9 8.9 ICTA 8.9 11.7 12.3 INAFOR 1/ 6.7 10.1 6.3 INDECA 17.8 38.2 57.5 Of which Central Bank Credit (6.0) (19.0) (29.5) BANDESA 61.3 116.5 116.7 TOTALS 197.3 298.8 367.2 1/ Closed during 1988 and incorporatedinto the Ministry. Source: Ministry of Finance, 1988 Budget Principal Sector Issues and Development Priorities 2.05 The Government'sdevelopment priorities in the sector stress the importance of diversifyingproduction, particularly the developmentof non- traditional agriculture exports, given sharp declines in the production of the country's traditionalexports (coffee, cotton, and bananas) and poorer price and market prospects for such crops. Other priorities include increased investment in irrigation to facilitate crop diversificationand improve productivity;addressing problems of the landless through the promotion of voluntary land purchase and distribution schemes; encouraging the development of agriculturalcooperatives and small and medium scale agro-industry;and ensuring the supply of basic foodstuffs by promoting increased production of basic grains and other essential commoditieswhile also seeking to improve the effectivenessof external food assistance. - 24 - Although these objectives are generally sound, the specializedplanning agencies--the National Planning Secretariat and the Agricultural Planning Unit of the Ministry of Agriculture--haveyet to develop a coherent strategy for achieving these goals. 2.06 Agriculture development faces two long-standingconstraints, namply, inadequate credit and insufficientcoverage and effectivenessof agriculture extension. Increased access to credit is crucial, especially for small farmers. Only about 10 percent of small farmers currently have access to institutionalcredit, reflecting strict lending standards and guarantee requirements. The bulk of available credit, including credit from private banks and the Bar.kof Guatemala (with IDB assistance),goes toi commercial farmers. At the same time, BANDESA. the agriculturedeveloprment Bank, which has responsibilityfor small farmer lending, faces severe financial and institutionalproblems which seriously limit its ability to utilize existing and proposed external credit from USAID and IDB. More than a third of its portfolio is in arrears. A major restructuringof BANDESA is essential if more effective credit services are to be provided. This could be combined with parallel efforts to expand the provision of agriculture credit by cooperativesand other private sector institutions. 2.07 Extension services are also minimal reflecting a poorly staffed agricultural extension department with only 100 professionalemployees, of which about 70 work in the highlands, and limited operational budget. Extension coverage in the highlands is equivalent to one extension worker per 3,000 farms, whereas a ratio of 1 to 200 to 300 farms would e desirable. Nevertheless,more effective extension requires not only increased funding, but more importantly the development of a new approach to extension which takes into account Guatemala's highly varied geographic, climatic, and population structure. Such an approach must deal with the technical requirementsof crop diversificationand export market development,as well as the needs of a poorly educated farming population with differing language backgrounds and limited financial and technical resources. Improving extension services also requires changes in the focus of agriculture research to i) increase research efforts in the Western Highlands given the Government'spoverty focus and the region's complex environmentaldiversity and problems; and ii) strengthen the applicability of research results to specific practical problems, including those arising from the introductionof mini-irrigation,thus devising technological solutions that are acceptable and can be more readily applied by farmers in the field. 2.08 A further policy issue relates to the Government'sprice support policy for basic grains. Support prices for basic grains other than wheat, are set by INDECA wihichimports, buys, sells and distributesmaize, beans and rice to guarantee that domestic producers can recover production costs and realize a minimum level of income. However, this support price policy has virtually no effect on producer prices, mainly owing to INDECA's very small share of the market. In fact, INDECA has purchased less than 3 percent of maize and 4.5 percent of rice production in recent years, mainly for seasonal market balancing purposes. Much of its purchases are from medium and large producers. Thus, while INDECA may have some influence in stimulating production and raising farm incomes for some basic grains in certain regions, its price support role does not have a major impact on stimulating basic grain production and enhancing food security. If - 25 - resources currently allocated to INDECA were invested in improved extension or rural infrastructure,they would probably result in more production of food and export crops as well as in higher farmer incomes and lower prices ior food. 2.09 Insufficientattention to environmentalissues and protection of important natural resources constitutes another major sector issue. One serious problem is the rapid depletion of Guatemala's forest resources. Indiscriminatecutting of trees, much of it for firewood, has a major impact on worsening soil erosion. This problem is most serious in the Western Highlands, where forest resources are projected to be totally depleted by the end of the century, if current trends continue. At the same time, deforestation of the Peten region is also accelerating,while reforestationefforts remain limited. A second important issue concerns water resource planning and conservation. Despite ongoing efforts to accelerate investment in irrigation,basic water resource investigationand planning work has yet to be completed. Moreover, while the new Constitution transferred all water resources to public ownership, a draft Water Law intended to regulate the use of water resources has yet to be approved by Congress. PublicExpenditures in Agriculture 2.10 Despite the strategic role of agriculture in the economy, the Government has traditionallyallocated only limited resources for agricultural services and investment. Public expendituresper person employed in agriculture have been substantiallylower than other countries in Latin America--for example about one half of what Bolivia, Costa Rica and Peru spent in 1980 (see StatisticalAppendix Table 3.1). Moreover, the sector's share in total Central Government expendituresfell substantially in the early 1980s from about 6 percent in 1980 to a low of 3 percent in 1985. Although the share of expenditureshas increased since then to 4 percent in 1987 and to an estimated 5 percent in 1988, the amount of funding for the sector remains inadequate. Total Central Government expenditures in agriculture in 1980 reached close to 1 percent of GDP, but fell sharply to a low of 0.3 percent of GDP in 1985. Expenditures increased to about one-half percent of GDP in 1987 and were budgeted to increase to 0.7 percent of GDP in 1988. 2.11 Public spending in agriculture is presently heavily dependent on foreign financing,with external resources financing about one-third of the consolidated agriculture sector budget. This share increases sharply for the Ministry of Agriculture itself, with only 36 percent of the 1988 Ministry of Agriculture budget financed from domestic resources. The remainder was expected to be financed from external loans (34 percent) and external grants (29 percent). The draft 1989 Central Government budget increases the budget of the Ministry of Agriculture by about one third over the 1988 allocation, with external financing expected to finance an even larger share (72 percent). - 26 - Planned Investment Program in Agriculture (1988-1991) 2.12 Based on estimates of currently programmed in:restments,public sector investment in agriculture, excluding credit, would total about Q355.5 million over the 1988-1991 period. This level of expenditure assumes that the implementationcapacity of the Agriculture Ministry continues to improve and that several new projects proceed as scb-duled. Table 2.2 Agriculture Sector Investment 1988-1991 (Q Million) 1988 1989 1990 1991 Estimated ...... Programmed. Irrigation 36.6 54.7 58.3 49.8 Livestock Development 4.8 6.4 2.1 1.0 Animal Health 7.8 4.5 - - Reforestation 1/ 2.0 11.0 11.6 19.9 INTA (Land Distrib.) 1.8 1.8 1.9 2.0 ICTA (Transfer of 1.5 4.1 10.2 7.3 Technology) INDECA - 7.4 9.2 11.3 Other 3.5 4.1 7.8 11.1 TOTALS 58.0 94.0 101.1 102.4 1/ Includes investmentprogram for INAFOR for 1988. Source: Ministry of Finance Budget Directorate and World Bank estimates. Ongoing InvestmentProjects 2.13 There are four major ongoing investment projects. These include: i) an Animal Health Project, which is financed by IDB and which focuses heavily on support for medium and large scale commercial ranching,with only limited support for small farmers (expected to be completed in 1990); ii) a Transfer of Technology Project, also financed by IDB with support from IFAD, which focuses mainly on strengtheningresearch capabilities, including the constructionof research facilities; iii) a Small Farmer and Crop DiversificationProject in the western highlands financed by USAID (expected to be completed in 1989); and iv) an Agriculture and Irrigation Development Project in the western highlands also financed by USAID. 2.14 The first project in the field of animal health, with its emphasis on commercial farming, is not expected to be repeated since it is no longer consistentwith the Government'semphasis on small farmer development. The second project in agriculture technology, given its emphasis on tralitional crops, is also not fully consistent with current Government priorities, but has substantial undisbursed funds which could be reoriented to focus more on small farmer research and extension needs, including - 27 - stronger support for crop diversificationin the western highlands. The latter two projects, given their support for small farmer development in the highlands, closely match current Government priorities. These projects emphasize crop diversification,terracing, reforestation,small scale irrigation, and extension service modernization. In view of their priority, investment in these activities should be continued and expanded over the medium term. New Investment Projects in Agriculture 2.15 There are five new investmentprojects which the Government plans to initiate in the next three years. These include two gravity irrigation projects, the Chixoy Dam ReforestationProject, a program to strengthen INDECA's marketing infrastructure,and a small farmer rural development project in the Eastern Highlands. The five projects are described in more detail below: a. Irrigation II. This project which is being financed by IDB includes three gravity irrigation schemes: 1,580 hectares in Caballo Blanco; 2,795 ha. in Cuyuta; and 108 ha. in Alto Mongoy. Average farm sizes are 18, 13 and 2.5 hectares respectively. Total cost of the project is estimated at US$14.6 million, of which IDB is financing US$10.6 million. Project costs average $2,500 per hectare which is on the high side, but remain acceptable. Since this project is mainly directed at improving productivityof larger scale commercial farms, the Government should ensure adequate cost recovery and/or consider ways of substitutingprivate sector financing for at least part of the project cost. b. Montufar Irrigation. This US$13.9 million project is proposed to be financed by the Italian Government under the recently approved financial protocol. The Montufar Project is a 3,500 ha irrigation scheme, with an average farm size of 20 hectares and a development cost of almost US$4000 per hectare. Given the relativelyhigh cost per hectare, and the large farm size, the Governmentmay wish to review the priority of this project in light of its current sector strategy which emphasizes support for small scale irrigationto improve productivityof small farmers. Since the Italian financin6 would be provided on a grant basis, the Government may wish 'o review whether such funds could not be better used for priority social sector projects where cost recovery is much more difficult. c. Chixoy Dam Reforestation Project. This project is included in the investment program of the Agriculture Sector, even though it is primarily designed to prevent siltation of the Chixey reservoir, to protect the Chixoy Hydroelectric scheme. The project is proposed for financing by IDB, with an estimated cost of $20.0 million. - 28 - d. Marketing Infrastructure. The fourth project to be initiated in the next few years would support expansion of INDECA's marketing infrastructurewith the construction of warehouses, small silos and other storage and distribution facilities. The planned US$11.0 million project is proposed for financing under the Italian Protocol. Given the limited impact and high cost of INDECA's operations, further expansion of its facilities should be halted pending a full review of its role and contributionto the sector. e. Zacapa/ChiguimulaRural Development. This project is intended to increase food grain productiornand support crop diversificationin the departments of Zacapa and Chiquimula in the Eastern Highlands. The project would benefit about 5,000 smallholder families (with less than 3 ha) and would include training and extension, marketing support, credit, and forestry components. Total project cost is estimated at US$24.2 million, with financing proposed to be p:ovided by IFAD and the Netherlands. Project appraisal is expected to be completed during the first part of 1989. Agriculture Credit 2.16 Public sector resources available for agriculture credit for the 1988-91 period total an estimated Q 500 million, including an on-going credit operation through the Bank of Guatemala, which is financed by IDB. However, utilization of these resources presumes an accelerated effort to resolve serious institutionaland operational issues affecting the operations of BANDESA, or rapid progress in developing substitute credit channels through cooperativesor other private sector institutions. Both USAID and the Federal Republic of Germany (through GTZ) are providing technical assistance to BANDESA, and the proposed IDB financed US$45.0 million small farmer loan is conditioned on satisfactoryprogress in initiating the technical assistance and institutional reform effort. Table 3.3 Agriculture Credit (1988-1991) (Q Million) Institution 1988 1989 1990 1991 Estimated ---- Programmed------ BANDESA 69.7 82.9 85.3 114.0 Bank of Guatemala 10.8 39.6 58.9 38.8 TOTAL 80.5 122.5 144.2 152.8 Source: StatisticalAppendix, Table 2.3. - 29 - Conclusions and Principal Recommendations 2.17 Achievement of the Government'sagriculture development goals requires an-adjustment of expenditure priorities as well as an accelerated effort to resolve key institutionalbottlenecks. Although public spending on agriculturewill probably need to be increased over the medium term, the Government's first priority should be to review the effectiveness of existing programs and reallocate resources within the sector to better reflect current Government priorities. There are three basic areas where major changes are recommended. These are'asinclude i) the focus and content of the investment program; ii) the need to improve access to agriculture services, including extension and credit; and iii) food security policies. Reshaping Investment Priorities 2.18 The present investmentprogram reflects a mix of objectives including substantial support for irrigationdevelopment and crop diversification,both for small and large farmers; financing for marketing facilities; limited support for reforestation;improvement of agriculture research and technology; credit with particular emphasis on commercial farming; and support for livestock development and animal health, again mainly directed at commercial and large scale farmers. While these objectives are consistentwith a broad range of Government objectives, resource constraints and the Government'semphasis on poverty alleviation, would argue for a more targeted investment effort directed principally at small farmer development and increasinglyserious environmentalprotection needs. The approach recommended is to focus investment on those areas where private sector investment is unlikely to respond adequately. In this context, at least one of the two new irrigation projects should be reevaluated,possibly the Montufar project which is not yet fully underway. Similarly, the on-going agriculture technology project, which still has substantial undisbursed funds, ought to be reviewed to see whether remainingwork could not be redesigned to better meet small holder, crop diversificationand export promotion needs, with particular emphasis on the Altiplano. 2.19 With respect to future investment in agriculture,the Government should consider an expanded project preparation effort focusing on i) expanding on-going successfulprograms in the Altiplano for diversifying production of smallholders, includingmini-irrigation; and ii) developing or expanding soil conservationefforts, including substantially increasing investment in reforestation. Other major public investment in the sector may not be warranted on the assumption that investments in rural roads, primary education, and primary health care are equally important in improving the living standards of the rural poor and laying the basis for increasing agriculture production. Current plans to substantially increase major irrigation investmentover the medium term for a total investment of close to Q 0.8 billion by the year Z000 should be reconsidered given the high cost per hectare and emphasis on large scale commercial farms. Although some limited public sector investment in large - 30 - scale irrigation could be considered provided cost recovery policies are satisfactory, sector policies should promote direct private investment in irrigation for most major irrigationprojects in areas suited for large scale commercial farming. StrengtheningAgriculture Extension and Improving Access to Credit 2.20 Improved agriculture extension is critical for growth of small farmer incomes and productivity. This requires an indepth evaluation of existing extension efforts to clearly identify principal constraints, coupied with the identificationof alternative approaches to meeting the needs of small farmers in the Altiplano while also improving export diversificationand export market development. One possib'. approach would be to build on the system of local agriculture representativesnow being established. This would require an expanded training effort, including the development of new approaches to increase the effectiveness of the limited staff available to the Ministry for training and demonstrationwork. One alternative could be to adapt the 'training and visit" approach to Guatemalan conditions. Other approaches might consider the use of model farmers and the introductionof supporting audio-visualmaterials, complementedby private sector and NGO sponsored extension development efforts. Additional financing for extension could come from a reallocationof funds within the Ministry budget as well as a possible reallocationof funds from INDECA (see para. 2.08). 2.21 A similar effort to improve access to credit is also urgently needed. Otherwise already available or planned external support for credit cannot be utilized. This requires the modernization and reorganizationof BANDESA as well as the consideration of other mechanisms for providing credit to small farmers and ensuring sufficient capital for private investment in input supply, marketing and export ventures. On-going technical assistance efforts to strengthen BANDESA, with support from USAID and the Federal Republic of Germany should be expedited, with strong Government support as needed. Food Security Issues 2.22 A third area of concern is the Government's approach to food security and the cost effectivenessand impact of ongoing programs which support the production and marketing of basic grains and promote self- sufficiency in basic food supplies, ever though the cost of domestically produced supplies is higher than internationalprices. Problems in food security do not necessarily result from inadequate food supplies, but from a lack of purchasing power on the part of countries and households. As such, policies and programs in food security need to be designed so that they contribute to general economic growth while at the same time providing the poor and disadvantagedwith greater access to food. This will require a careful balancing of measures for trade, production, and poverty alleviation. Since Current Government policies may in fact be hurting both the rural and urban poor, they need to be carefully reviewed. Such a review should assess the effectivenessof INDECA's operations, including the costs and effectivenessof efforts to achieve self-sufficiencyin basic - 31 - grains, while also exploring alternative approaches to ensuring the availability of food supplies, including better use and targeting of food aid. Pending the carrying out of a detailed review of food security issues, planned investments in INDECA marketing facilities should be put on hold. Technical Assistance for Agriculture Development 2.23 The recently reestablishedUNDP Technical Assistance Project for Agriculture Development in Central America (RUTA II) for which IBRD is acting as executing agency (with financing from Japan, UNDP, IFAD and IICA) will provide further support to the Ministry of Agriculture in helping strengthen its capacity to address the underlying sector and investment issues outlined above. More specificallythe technical assistance unit, which will be based in Costa Rica and work initially with Guatemala, Honduras and Costa Rica, will assist the institutionsinvolved in i) designing appropriate agriculture sector adjustment policies and programs; ii) improving the management of programs intended to reach Indian communities and the rural poor in general; iii) preparing agricultural programs and projects; and iv) strengtheningdonor coordination. - 32 - CHAPTERIII: POWERSECTOR Sector Overview 3.01 Public electricity service is provided by the Instituto Nacional de Electricidad (INDE), the Empresa Electrica de Guatemala S.A. (EEGSA) and ten small municipal utilities. INDE is a government-ownedenterprise repo-ting to the Minister of EneLgy and Mines. It is responsible for the bulk of power generation and transmissionin the country, as well as f'-r distributionof power to about 250,000 customers in small villages and rural areas. EEGSA, a former foreign-ownedutility, is now controlled by INDE, which owns 92 percent of its stock. It provides service to about 317,000 custonmersin the Guatemala City metropolitan area. Municipal utilities provide the remaining electricity service in the country serving about 10,000 additional customers. 3.02 In 1987, total installed capacity in Guatemala was 574 MW, of which 74 percent was hydro; the remaining capacity was in thermal plants, most of which have been poorly maintained and are now in the process of being rehabilitated. With the completion of the large Chixoy scheme (280 MW) in 1986, Guatemala's generaticn system was transformed from one heavily dependent on oil to one relying almost entirely on hydropower. However during 1987, lower than normal rainfall resulted in water shortages during the dry season, thus forcing the use of supplementalthermal generation to meet the maximum demand of 381 MW during that year. Table 3.2 in the StatisticalAppendix provides historical and projected data on demand and sales. 3.03 Although the number of residential customers has increased by about 7.4 percent per year since 1979, electricity consumption per capita, estimated at 156 kWh per year, remains low. About 37 percent of households receive electricity service, compared with 36 percent in El Salvador, 45 percent in Nicaragua, and 79 percent in Costa Rica. Total electricity consumption stagnated during the first half of the 1980s, reflecting sharp drops in industrial demand as the economy declined. During the past two years, however, consumption has begun to recover along with the recovery of the economy. Key Sector Issues 3.04 The priacipal issues confronting the power sector are institutionaland financial, with INDE confronting a major financial crisis. This results mainly from INDE's high debt service requirements, combined with INDE's weak management capacity and poor operational performance. INDE's financial problems are extremely serious, with the company projecting deficits of Q 100 to 150 million per year through 1991 (See Table 3.2). INDE's poor performance has been exacerbated by inadequate tariff adjustments (despite an average increase of 22 percent in early 1988), a poor collection effort, and the failure to address organizationalissues affecting the efficiency of the company's operations, including a serious overstafring problem. The ratio of consumers to staff for INDE Is about 35:1, which is about double the level achieved by most utilities in developing countries. INDE's precarious financial health was - 33 - further eroded following the Gove:nment'sdecision to unify the exchange rate in late June 1988. As a consequence,INDE's debt service is now calculated at the new unified rate of Q2.7 to US$1 rather than at a ratio of 1:1, thus virtually tripling INDE's debt service requirementsin local currency. 3.05 EEGSA is a well managed and financially sound company, with low debt servicing requirements. Nevertheless,without additional tariff increases beginning in 1989, its financial performancewould deteriorate sharply, with the company incurring deficits averaging Q15 to 20 million in the coming few years. Sector performance has also been constrained by the lack of adequate coordinationbetween INDE and EEGSA. Moreover, EEGSA may not be adequately contributingto heavy sector investments in generation which have beetncarried out almost entirely by INDE. Over the past five years, the Government has taken a number of steps to improve coordination, including creation of a Ministry of Energy and Mines with overall responsibilityfor the power sector, nominating the same president for both EEGSA and INDE and creating a joint INDE-EEGSA commission to coordinate operation of the power network. Despite these efforcs, poor coordinat..or between the two institutionscontinues, especially in respect to fir.ancl. planning, planning of the distributionnetwork, and in regard to procurement and training of personnel. Sector PlannJng 3.06 In late 1988, INDE completed preparation of a power sector development plan ("Plan Nacional de Electrificacion")which details sector requirements through the year 2000. As a starting point for this exercise, INDE prepared an electric energy demand forecast with external assistance. This forecast takes into account projected consumption patterns based on growth of population and GDP, while also considering other factors such as the number and distribution of customers. As a result of this analysis, electricity sales are projected to grow at a compound annual rate of about 7.1 percent during the 1987-1992 period, and 6.6 percent in the period 1993-1997. This demand forecast seems reasonable as sales per connected customer would only increase by about 3% per year, and most of the growth would be caused by new connections;however, the relatively large tariff increases that are required on financial and economic grounds could result in lower demand. Sector Investment Program, 1988-1991 3.07 Programmed investment in the sector, including investments planned by both INDE and EEGSA total about Q820 million over the 1988-91 period. As indicated in the Table 3.1, about 87 percent of proposed investment in the sector would be carried out by INDE, with the remaining 13 percent, totalling about Q104 million being programmed by EEGSA for its distribution network. About 40 percent of INDE's investment program is for generation, with another 30 percent allocated for transmissionand distribution. The remaining 30 percent of the program is devoted to studies and other investments such as the repair and rehabilitationof thermal and small hydro plants, as \ 11 as constructionof a national dispatch center. The generation investments over the four year period include i) constructionof the El Jute drainage gallery to ensure the reliability of the Chixoy hydroelectric plant; ii) completion of the constructionof Zunil 1 (15 MW), - 34 - a first geothermal operation; iii) completion of the construction of Gas turbine No. 6 (33 MW) to provide further reserve capacity should further problems with Chixoy develop; iv) constructionof Steam Unit No. 3 (50MW) starting in 1990 to further increase reserve capacity; v) initiationcf the Rio Bobos hydro-scheme (BMW) in 1990; and vi) initiationof the Santa Maria 2 hydro scheme (68 MW) in 1991. The present program for new generation facilities through the year 2000 is shown in the Statistical Appendix, Table 3.5. Table 3.1 Power Sector Investment Program - 1988-91 Q Million) INDE 1988 1989 1990 1991 Totals Estimated - Programmed------ Generation 20.6 31.1 98.5 122.7 272.9 Transmission 4.0 0.7 32.3 28.7 65.7 Distribution 14.7 34.9 51.1 41.8 142.5 Studies 6.3 39.3 61.5 66.3 173.4 Other Investments 0.7 7.6 26.4 30.2 64.9 Sub Total 46.3 113.6 269.8 289.7 719.4 EEGSA 21.3 23.0 30.0 29.6 103.9 Total 67.6 136.6 298.8 319.3 823.3 Source: INDE/EEGSAand Bank Staff Estimates 3.08 The overall make up of the power sector investmentprogram over the next four years is reasonable, although the substantial expenditures allocated for studies (about 24 percent of the total program), even though justified, may be excessive given INDE's current difficulties. Nevertheless, INDE's serious financial and institutionaldifficulties require a careful review of the program to reduce it to the minimum needed and achievable over the next few years. Such a review should take into account i) lNDE's institutionalconstraints and limitations on its ability to carry out the investmentprogram in the timeframe proposed; ii) the likelihood that demand forecasts for the early to mid- 1990s are probably on the high side, thus enabling some investments in new capacity to be postponed for a few years, iii) the need to reduce the heavy investment in studies through more careful programming;and iv) the fact that proposed new external financing may not materialize as currently programmed given INDE's financial constraints. INDE should also consider the possibility of reducing planned investment in hydro. given its higher capital costs, and substitutinginstead increased investment in thermal generationwhich is less capital intensive and which may be more attractive now given lower petroleum prices. 3.09 Taking into account the above constraints, the proposed investment program in power for the next three years (1989-91)may need to be reduced by about 30 percent by postponing constructionof new generation facilities - 35 - by one to two years, slowing down expansion of the transmissionnetwork, and reducing investment in planned studies. Assuming revisions along the above lines, programmed investment in the sector for the period 1989-1991 could be reduced to about Q 550 million. Nevertheless, even though a lower level of investmentwould reduce the amount of direct Government support and tariff increases required in the next few years, major actions to improve sector finances would still be needed urgently. Financing Needs 3.10 Financial projections for the 1988-91 period for the power sector, as summarized in Table 3.2 below, show deficits of Q 526.1 and 54.6 million respectivelyfor INDE and EEGSA, assuming no further tariff adjustments and maintenance of the originally proposed level of investment. Given these deficit levels, neither EEGSA or INDE would be able to contribute adequately to their investment financing needs. At the same time INDE would be unable to cover its debt service requirements. If the sector is to achieve the programmed level of investment,and if direct Government financial support to the sector is to be minimized, electricity tariffs would need to be increased on average by about 65 percent during the 1989-91 period. A tariff increase of this magnitude would enable INDE to service its debt and cover about a portion of its investment requirements from internally generated funds. At the same time, the proposed increase would enable the Government to reduce its financial support to about Q 40 to 50 million over the same period. Since a tariff increase of this size could have political and economic implicationsif introduced in one step, the impact of the increase could be eased by introducing the price adjustments in small monthly or quarterly increments. 3.11 The amount of tariff adjustment or Government contribution required could be reduced by postponing investment in the sector as discussed in para. 3.9. However, the savings would be limited to about Q 40 to 50 million as most investment is financed from foreign sources. As such a major tariff adjustment on the order of at least 60 percent would still be required. The only other alternativewould be to sharply increase Government financing of the sector, although this would have adverse implicationsfor the Government's fiscal situation. In any case, any substantialGovernment support should be in the form of equity contributions or long term loans conditioned on satisfactoryprogress by INDE in strengthening its management and operational framework. - 36 - Table 3.2 Power Sector Funding Requirementsand Financing Plan (1988-1991) (QMillion) 1988 - 1991 INDE EEGSA Requirements 695.5 156.7 Investment 719.4 103.9 Variation in Working Capital -23.9 52.8 Financing 169.5 102.1 Gross Internal Cash Generation 457.8 95.6 less: - Taxes and Dividends - 24.4 - Debt Service 732.8 9.3 Existing borrowings 379.6 29.7 Consumer and Government Contribution 64.9 10.5 Deficit (526.1) (54.6) Source: INDE/EEGSA and World Bank estimates Conclusions and Principal Recommendations 3.12 Since a continued expansion of Guatemala's power sector is essential if the country is to meet its growth objectives and increase access of the population to electricity,a major restructuringof the sector, particularly INDE is urgently needed. INDE's ability to carry out its investment program, will depend heavily on its ability to implement a financial and institutionalrehabilitation program. Such a program would need to i) reestablish INDE's financial health through a combination of tariff increases, increased operational efficiency, and direct Government financial support; and ii) address INDE's serious institutionaldnd managerial problems, including ensuring INDE's capacity to recruit and keep appropriately trained and skilled personnel (by excluding the institution from Civil Service requirementsas recently approved) while reducing its current overstaffing; strengtheningits capacity to develop realistic investment programming; and carrying out a series of recommendations already developed by consultantswith respect to asset revaluation; administrative reforms, and introducingimproved tariff policies and costing. In addition to the above, action is needed to i) improve coordination between INDE and EEGSA and introduce an improved distribution of activities between iNDE, EEGSA, and the municipal power companies; and (ii) establish a regulatory body for the se.VLi in the Ministry of Energy and Mines to permit adequate external supervision of the sector's investment plans, finances, and operations. - 37 - 3.13 IN1DE'sproblems should be addressed within the framework of a detailed adjustment program to be agreed between INDE and the Government. Such a program could take the form of a legal contract between the Government and INDE under which the Governmentwould agree to provide financial support to INDE in return for INDE's agreement to carry out specific steps to rationalize its expenditures and improve its efficiency and productivity. This contract aould spell out clearly the actions to be taken to strengthen INDE's finances, including tariff adjustments and Government capital contributions. The Governmentwould also need to ensure that INDE would have the professionalmanagement required to carry out a full restructuringof the institution,as well as the autonomy needed in personnel matters to enable INDE to carry out the other institutionaland staffing adjustments required. - 38 - CHAPTERIV: THE TRANSPORTSECTOR Sector Overview 4.01 Guatemala has a basic transport system in place, including a well developed primary and secondary road network; more than adequate port capacity on the Pacific and Atlantic Coasts; adequate air transport facilities; and a railway system linking the two coasts and the Mexican border. Principal sector investment issues include the poor condition of the road network as a result of neglected rehabilitationand maintenance, and the need to further expand the feeder road network to support agriculture sector growth, market integration and lay the basis for improved access to social and other scrvices. Only small investments are needed in the ports in the short-ternito improve operating efficiency, including specializedbulk and container handling facilities. Similarly, airport infrastructureis generally adequate given existing traffic levels and no major investmentsare required in the coming few years. Nevertheless,existing facilities should be reviewed to ensure adequate support for the Government'sexport drive. Major railwa-,investments are also unnecessary and currently not planned, given the questionable future economic role of the railways. InstitutionalFramework 4.02 Transport sector nanagement is scattered among several public agencies and enterpriseswith varying degrees of autonomy. The Ministry of Communications,Transport and Publ'c Works (MCTOP) plays a leading role in overall sector management and planning, which role was strengthened following a series of institutionalreforms Instituted in 1987. In addition to road transport development and administration,MCTOP is also responsible for aviation infrastructurematters, as well as overall supervisionof the Guatemalan Railway Company (FEGUA) and the new Port of Quetzal. Internationaland domestic air services are provided by the Government owned Guatemalan Aviation Company (AVIATECA) and by private operators. Port facilities at Santo Tomas de Castilla, the country's largest port on the Atlantic are managed by a semi autonomous Port Authority (EPNSTC),while facilities at the new Port of Quetzal on the Pacific are operated by a public executing agency established in 1979. The three smaller ports--Barrios,San Jose, and Champerico--areoperated under the supervision of FEGUA. 4.03 As part of an effort to strengthen management of the transport sector, MCTOP has developed an Action Plan designed to address major sector issues. The principal actions contemplatedunder the program include: i) periodic adjustment of road user charges to cover, at a minimum, the variable costs of road use associated with each category of vehicles; and ii) preparation and implementationof a National Transport Plan, to be carried out in part by consultants financed under the IBRD supported Secondary Roads RehabilitationProject. This Plan would cover the following topics: strategy and actions needed to reduce the railway operations deficit; port tariffs and operational efficiency; transport regulatory framework, particularlypassenger transport; transport expenditure and investment program; institutionalchanges needed to strengthen sector coordination;and an assessment of the environmental - 39 - impact of transport programs. The program also envisages actions to strengthen the ability of the Ministry to manage an expanded investment program, including improving the road and equipment management system, adjusting contracting policy to permit contracting out of all construction and rehabilitationwork for primary and secondary roads to reduce costs, improving financial management and accounting practices, and strengthening personnel through training and technical assistance. Planned Investment in Transportation 4.04 Pending completion of the National Transport Plan, currently expected to be completed in 1992, the Government'spriorities in transport would ccntinue to concentrate on road rehabilitationand agriculture feeder road or rural access road development. These priorities reflect the urgent need to repair and better maintain the country's basic road network, as well as the need to increase access to rural areas if agriculture productivity is to be increased and the country's rural population is to have better access to education, health and other services. In addition to the above, the Ministry will also continue with the constructionof new roads or road sections on a more limited basis to reduce congestion or foster integrationof key regions. 4.05 The Government's investment program in the transport sector, including projects already underway and those expectpd to be initiated during 1988-1991, would absorb about 14 percent of total programmed public investment for the period. The bulk of the planned investment is in road rehabilitationand improvement rather than new construction,with about one-fourth being allocated for rural access roads. No major investments are currently programmed during the period for ports, with the exception of relatively small investments to complete on-going equipment purchases and make other small improvementsin port operations, although the Government is considering major investments in Puerto Santo Tomas de Castilla to be carried out during the 1990s (see para. 4.13). Programmed investment in airport infrastructureis limited mainly to improvementsin navigational aids. No investments are programmed for FEGUA reflecting the entity's financial constraints. Table 4.1 - Transport Sector Programmed Investments 1988-91 (Q Million) Estimated ---- Programmed------1988 1987 1990 1991 Totals Roads 45.3 148.2 128.6 116.8 438.9 Airports 6.5 10.5 9.8 9.8 36.6 Ports 8.8 11.2 22.6 16.9 59.5 TOTALS 60.6 169.9 161.0 143.5 535.0 Source: Statistical Appendix, Table 2.4 - 40 - Roads Subsector 4.06 Guatemala has a well developed primary and secondary road network which as a result of aging, unsuccessfulefforts in controlling vehicle- axle-load and neglected maintenance has reached an advanced state of deterioration. The national highway network comprises about 12,000 1'w.of primary and secondary roads, of which some 3,100 Km are paved and the rest earth or gravel. The network also includes about 1,100 km of low 'raffic tertiary roads, mostly developed and maintained through community programs financed by USAID. Unpaved roads have accounted for a large part of the 40 percent growth in the national network since 1976, with most of the remaining network having an average age of over 20 years. Results of a road condition survey carried out under a previous IBRD financed Project (Loan 1846) indicate that about 60 percent of the paved network (about 1,900 km) is seriously deteriorated and that an additional 1,400 km requires priority pavement strengthening if deterioration is to be halted. This survey also indicated that at least 50 percent of the unpaved network (some 4,000 km) would need to be rehabilitatedor receive periodic maintenance,given its poor condition or traffic levels above 100 vehicles per day. For some 30 percent of these roads, carrying about 100 vehicles per day, it would be more economical to improve drainage and provide gravel surfacing than to attempt to maintain their level of service with intensive routine maintenance operations; for the remaining unpaved network, surface grading would be adequate. In addition, many of the bridges included in the secondary and tertiary road networks are small temporarywooden structures which require repair or replacement. An independent survey of bridge condition undertaken by the Ministry of Public Works indicated that more than 700 bridges are in need of urgent repair and that some 200 temporary structures need to be replaced by permansnt works. 4.07 In 1987 the Directorate of Roads completed preparation of a pluriannual expenditure program covering the period 1988-1994with heavy emphasis on rehabilitationand periodic maintenance (83 percent of the total), followed by routine maintenance (15 percent), and administration (2 percent). Investment in rehabilitationand upgrading of existing road infrastructure,including rehabilitationand paving of earth roads and bridge replacementwould account for 77 percent of total investment with tertiary road construction accounting for 18 percent, and equipment, training, supervision and studies making up the remainder. Total cost of the program is estimated at US$431 million, including contingencies,but excluding debt service obligations which are considered in the Central Government budget. The program also establishes physical targets for the period including: (a) rehabilitationand periodic maintenance of about 1,400 of badly deteriorated paved roads, including the country's main external trade corridors and the Altiplano region network; (b) rehabilitationand periodic maintenance of a further 4,000 km of high priority secondary roads, in support of improved integrationof the national road network; (c) paving of some 160 km of the road connection to El Peten; and (d) constructionof about 2,600 km of tertiary roads and rehabilitationof a further 330 km for improved access to areas which still remain largely outside the main stream of the economy. (See Statistical Appendix, Table 3.7) - 41 - 4.08 Planned investments in the roads subsector total Q438.9 million for the 1988-1981 period (see Table 4.2 below). However, actual investments could be lower, unless the execution capacity of the Ministry of Public Works is improved. The bulk of the planned investment is concentrated on projects financed with external support. These include: (i) an IDB financed tertiary and rural access roads project approved in late 1986, with actual constructionbeginning in November 1988; (ii) a second IDB financed project for the reconstructionof the main highway CA-9 Norte, approved in September 1985 but not started until late 1988 given problems in completing the bidding process; (iii) the IBRD financed Secondary Roads Rehabilitationproject which is expected to get underway in late 1989 or early 1990, assuming approval by the Guatemalan Congress during the first half of 1989; (iv) a CABEI financed project to improve a section of the main highway CA-1 which is under execution, with additional CABEI financing for three small rehabilitationprojects for sectors of the main CA-9 CA-2, and CA-1 highways approved by the Guatemalan Congress at the end of 1988 and signed in early January 1989; (v) a program of labor intensive rural access road development financed by USAID; and (vi) a further program of rural road contraction to be financed with a recently approved loan from KfW. 4.09 In addition to the above, several major new projects are proposed for external filancing. These include (i) constructionof a paved highway Modesto Mendez-Poptun-Flores(in Peten) expected to be initiated in 1990 with possible German financing;and (ii) constructionof the Autopista Palin Escuintla proposed for Italian financing, to be initiated in 1989 or 1990. Since the Modesto Mendez-Floresproject consists of a major upgrading of the existing road, it is expected to accelerate the settlement of El Peten while also speeding up the extraction of the areas's forest resources. In view of this, it is extremely important that implementation of the project be carried out within the context of a development program for this environmentally fragile area which ensures that its natural and cultural resources are adequately protected. Table 4.2: Roads Subsector Planned Investments 1988 - 91 by Road Category (Q Millions) Categories 1988 1989 1990 1991 Totals Road Construction 6.0 31.9 40.9 38.6 117.4 Rehabilitation/ 7.4 66.5 53.5 56.1 183.5 Improvement Rural Access Roads 31.4 48.3 32.7 20.6 133.0 Other 0.5 1.5 1.5 1.5 5.0 TOTALS 45.3 148.2 28 .6 116.8 438.9 Source: StatisticalAppendix, Table 2.4 - 42 - Ports Subsector 4.10 The Atlantic port of Santo Tomas de Castilla, the largest of Guatemala's five principal ports, handles about two-thirds of national port traffic, with traffic growing at about 7 percent per year siiice1980. The Pacific Port of Quetzal, the second largest port handles about 18 percent of port traffic, with the remaining traffic handled by the other three ports. The Port of San Jose (located on the Pacific) is now specializing in bulk liquid imports, mainly petroleum products. Champerico (on the Pacific) and Barrios (on the Atlantic) are operating in a very deteriorated condition, and their share of traffic will likely continue to decline in the future given the availabilityof more modern facilities elsewhere. Low port productivitycontinues to be a major problem, especially for Puerto Santo Tomas de Castilla. 4.11 Having invested heavily in the ports subsector in the early 1980's with construction and opening of Port Quetzal in 1983, planned investment in the subsector in the period 1988-91 is limited mainly to improving equipment and some handling facilities. Total investment in the subsectoL programmed during this period is estimated at 59.5 million or 11 percent of the total sector investmentprogram. 4.12 The Government is however considering a number of alternativesto improve the efficiency of Puerto Santo Tomas de Castilla, including major new investments in port facilitiesbased on a master plan study prepared by the Japanese InternationalCooperation Agency. Although new investment in the port will be needed in the future, first priority should be given to improving the port's low productivityto ensure that existing and future port facilitiescan be used as efficiently as possible. Improvements in productivitywould also enable new investments to be phased in over a longer period of time. Railway Subsector 4.13 The railway system comprises about 800 km of narrow gauge track, most of which is now paralleled by paved roads. A 600 km mainline crosses the country from the Mexican border at Tecun Uman to the Atlantic ports of Castilla and Barrios, passing by Guatemala City. An additional 200 km of branch lines connect the main line with the Pacific ports of Quetzal, San Jose and Champerico and with the Salvadoran border. The difficult geometric conditions of the network, aggravated by the very deteriorated condition of the track and rolling stock have resulted in poor operating performance. In 1986 FEGUA transported about 600,000 tons of cargo over an average distance below 180 km together with about 400,000 passengers at an average distance of 80 km. Given the small volume of traffic and low distances involved, it is difficult for the railway to play an economic role in competitionwith road transport. Although the public sector investment program for the period 1988-91 includes no investment in the railway subsector, the medium term investmentprogram prepared by the planning agency (SEGEPLAN)proposes major new investmentsto rehabilitate - 43 - and modernize the existing system. Given the high costs involved and possible low rates of return, considerationof major investment in railways should be delayed pending completion of the National Transport Plan which will formulate an overall strategy to deal with FEGUA's financial and operational issues. Aviation Subsector 4.14 The Government operates and maintains six main domestic airports through the General Directorate for Civil Aviation. Guatemala City is served by a modern internationalairport, and the Government is currently upgrading the Santa Helena airport in the El Peten region to intsrnationalstandards. Overall, existing facilities are sufficient for the levels of air traffic, and no major investments are planned in the next few years. Programmed investments for the 1988-91 period are estimated at Q36.6 million or 7 percent of total sector investments. The bulk of these expenditures are for air navigation equipment financed in part with French Government assistance. Other investments for strategic or touristic development may also be considered in the future. Conclusions and Principal Recommendations 4.15 The Government's 1988-91 investment program in transport, with its emphasis on road rehabilitationand rural access road construction,is consistent with sector priorities. Nevertheless, the Government confronts three basic expenditure related issues which affect future irvestment in the sector. First, with respect to the road subsector, the Government's principal challenge will be ensuring adequate financing for the program and acceleratingproject execution by the Ministry of Public Works. Estimated investment in the road subsector for the period 1988-91 already indicates a lower rate of execution than proposed in the Ministry's 1988-1994 program. Road rehabilitationand maintenance must continue to receive high priority given tL-leimportance of the road system for promoting agriculture development and facilitatingexport development. Second, the Government needs to carefully review the feasibilityof new investment in railways, given the questionable economic role of the railways in competitionwith road transport. No new investment in railways should be contemplated pending the results of the National Transport Study. Third, with respect to ports, the Government should carefully assess the timing and magnitude of proposed new investments in Puerto Santo Tomas de Castilla. Although, Guatemala's export development strategy and the country's heavy dependence on foreign trade clearly requires an efficient port system, new investment ought to be preceded by or at least accompaniedby a program to strengthen port management and operations to enable existing facilities to be utilized as effectively as possible. - 44 - CHAPTER V: TELECOMMUNICATIONSSECTOR Sector Overview 5.01 As a result of inadequate investment levels and slower than expected implementationof programmed investment in telecommunications, Guatemala confronts serious bottlenecks in telecommunications,particularly in respect to telephone service, which is of poor quality and currently meets only about 40 percent of demand. A substantial effort is therefore needed to accelerate completion of investments already underway, while ensuring adequate preparation, funding and execution of new investments. Institutional Framework 5.02 The telecommunicationssector is under the responsibilityof the Ministry of Communications,Transport and Public Works (MCTOP), and comprises mainly the Empresa Guatemaltecade Telecomunicaciones(GUATEL), together with two Directorates in the Ministry responsible for i) post and telegraph and ii) radio and television. GUATEL, a state-owned,autonomous, commerciallyoriented enterprise, is responsible for all public telecommunicationsservices in Guatemala except domestic telegraph,which is operated by MCTOP. Under its charter, GUATEL has full authority to determine its own development policy, tariffs, investmentprogram, annual budget, borrowings, organizationand staffing. However, in practice, tariff changes and investmentplans require Government approval. Current Service Levels and Sector Development Objectives 5.03 As of end-1988, with 137,235 main telephone lines in service, Guatemala had an average line density of about 1.56 lines in service per 100 inhabitants. Telephone service is available in the capital city and in each of the country's 22 provinces. However service is concentratedin the capital city area, with greater metropolitan Guatemala City utilizing 80 percent of all telephone lines in service. Only 172 of the country's 304 municipalitieshave service of any type; of these municipalities,60 are served only by public call telephones. There are about 1,262 public call offices or coinbox telephones in the country, of which sixty-one percent are located in the capital city. Demand satisfactionfor telephone service (working lines/working lines + unmet demand) is currently estimated at 40 percent. Telex exchange capacity at end-1987 was 1,500 lines with 1,373 subscribers. Demand satisfactionfor this service was 98 percent at the end of 1987. 5.04 Given the substantial shortage of telephone lines relative to demand and the delay in implementationof GUATEL's 1984-87 investment program (now expected to be completed in 1990), there is heavy congestion in local service, particularly in Guatemala City. Congestion in the local network is also reflected in the internationaltelephone service, where the call completion rate for incoming calls is only about 35 percent compared to about 70 percent for a well-functioningnetwork. The situation should be partly alleviatedwith the commissioningof a new internationalexchange and four new local exchanges in Guatemala City, currently being installed. - 45 - 5.05 In order to sharply reduce existing bottlenecks and meet a large part of increased demands for service, GUATEL's 1988-95 development plan proposes to meet about 80 percent of demand for telephone service in the metropolitan and other urban areas in the interior of the country by 1995 (see Table 5.1 below); the plan would also extend basic telephone service to all 304 municipalities, to 462 settlementswith a population of 1,000 or more, frontier townships and places of tourist interest. At the same time new services would also be introduced such as data transmissionservice and mobile telephones;while the existing network would progressivelybe modernized towards full digitalization. The plan also calls for improved institutionalefficiency through major organizationalreforms, including increased use of private-sectorassistance in sector development and operation. Table 5.1 Demand for Telephone Service, 1987-1995 1 Subscriber lines in Subscriber service as lines in Unmet Total % of total End of year service demand demand demand (1) (2) (3) (4) [2+3] (5) 1987 132,718 180,397 313,115 42.4 1988 137,235 201,815 339,050 40.5 1989 197,235 167,750 364,985 54.0 1990 242,235 150,323 392,558 61.7 1991 315,235 109,014 424,249 74.3 1992 355,235 97,274 452,509 78.5 1993 405,235 88,356 493,591 82.1 1994 450,235 82,457 532,692 84.5 1995 502,000 106,053 608,053 82.6 1/ Figures for 1987 are actual. Figures for 1988-95 are estimates. Source: GUATEL Sector Constraints 5.06 The principal sector constraints affecting the efficiency of operation and expansion of telecommunicationsservices relate to GUATEL's institutionalenvironment, sector structure and tariff policies. 5.07 GUATEL's investment effort has been slowed considerably by complex procurement procedures, and insufficientattention to project management. At the same time, Central Government control of its capital expenditure budget has restricted flexibility and managerial autonomy. Recognizing the need to provide GUATEL with greater flexibility, the Government agreed in - 46 - 1987 to grant GUATEL increased autonomy in personnel management, including hiring decisions, subject to meeting targets on operational efficiency. The Government and GUATEL are also exploring alternative sector organization arrangements, including private sector provision of certain services, such as (a) subcontractingof ancillary services, (b) establishing subsidiaries,with private participation,for services such as mobile radio, data and telex, and (c) increasing the use of private contractors for constructionof the network. Efforts to improve sector efficiency through a change in sector structure should be supported. 5.08 GUATEL's tariff structure constitutes a further major constraint on sector development. While internationaltariffs and installation charges were revised in 1986, domestic tariffs have not been adjusted since 1978. The current charge for a local call unit (of 2.25 minutes) in excess of the free allowance is Q 0.02 (US$0.01) for residential subscribers and Q 0.04 for business subscribers. Telephone rental is Q 4 for residential and Q 12 for business subscribers and includes 400 free local call units. These low tariffs have contributed to network congestion. An IBRD-financed tariff study in 1984 recommendeda reduction in pulse duration by 33 percent in conjunctionwith a reduction in the rental charge, which would have minimized the effect on low-usage subscribers but penalized high-usage subscribers. This has not yet been implementedbecause of (a) the lack of financial pressure (the adjustment of internationaltariffs in 1986 increased income significantly)and (b) the perception that domestic tariffs are politically sensitive (an attempt in 1986 to adjust domestic tariffs was reversed following complaints from the public). Nevertheless, adjustments sLould be considered. Maintaining low domestic tariffs will continue to degrade quality of service and constrain efficiency of provision of service. Sector Financing 5.09 GUATEL's financial performance over the past few years has been good. Its rate of return on average net revalued fixed assets for the period 1984-87 averaged 14 percent. Despite growth in subscriber connections over the period of less than 6 percent per annum, operating revenues grew at an average 13 percent per annum in real terms. Growth in traffic per line and the adjustment in internationaltariffs in 1986 (tariffs for internationalcalls are now dollar-denominated)contributed to revenue growth. Growth in operating income and net income averaged 9.2 percent and 13.8 percent respectivelyover the period (1984-1987). However, average growth in operating income and net income in real terms was less than 1 percent in 1966 and actually declined in 1987. The imposition by the Government of an additional tax on internationalrevenues (36 percent in 1986, 24 percent in 1987 and 20 percent in 1988), major salary adjustments in 1987, adjustments in depreciation rates in 1987 from 3.5 percent on average to 6 percent tc reflect increased technological obsolescence of telecommunicationsequipment and increased interest charges on foreign debt resulting from the devaluation of the quetzal were contributing factors. 5.10 GUATEL has financed the foreign exchange cost of its investment program over the period with a mix of multilateral funding (IBRD and IDB) and suppliers' credits. Local costs were financed with internally generated funds. The slow pace of implementationof its investmentprogram - 47 - due to protracted procurement procedures and delays in finalizing suppliers' financing contracts, as well as project management constraints, reduced actual investmentssharply over the past few years. As a result, there was a steady increase in GUATEL's liquid assets. By end-1987, cash and bank deposits represented20 percent of total assets (historical). 5.11 As summarized in Table 5.2 below, financial projections for the period 1988-1991 show a continued strong financial position for GUATEL. Table 5.2 Selected Indicators of Projected Financial Performance 1988 1989 1990 1991 Operating revenues (Q m) 232.7 310.36 373.1 491.5 Operating income (Q m) 23.7 50.5 62.6 100.5 Net income (Q m) 19.0 44.0 55.5 94.6 Rate of return (Z) 13 19 20 38 Source: GUATEL and World Bank estimates Operating revenues are expected to grow significantlyas a result of increased subscriber connections and an increase in internationaltraffic following expansion of the internationalexchange in 1988. Rate of return on assets is expected to exceed 13 percent, and debt service coverage to exceed 2.5. As a result GUATEL should be able to generate sufficient funds to finance local costs and part of the foreign costs of its investment program for 1988-91. Investment Program (1988-91) and Financing Plan 5.12 As summarized in Table 5.3 below, planned investment in communicationsfor the period 1988-1991 totals Q536.9 million, of which Q529.0 million is programmed for investment by GUATEL to expand and modernize the telephone network, with the remaining small amount to be utilized by the Ministry of Public Works for investment in telegraph and postal services. This very large investment effort is extremely ambitious, constitutingabout 13 percent of total public sector investment for the period, and will only materialize if GUATEL is able to complete needed financing arrangementsquickly, while also strengtheningproject management and project implementationcapacity. The fact that GUATEL was only able to execute about 25 percent of investmentsoriginally programmed for 1988 underscores the importance of strengtheningproject execution capacity. The major components of GUATEL's investment program are described below. - 48 - (a) Ongoing works. These are the delayed works of GUATEL's 1984-87 investmentprogram which is being financed in part by IBRD, IDB, and commercial sources. The program provides for (i) expansion of the local exchange capacitv by 109,800 lines (of which 79,000 are in Guatemala City), with associated expansion of the local and long-distancenetworks; (ii) installationof 3,500 additional public call office telephones; (iii) extension of telephone services to about 300 rural communities;and (iv) installationof a new internationalexchange in Guatemala City. The works are expected to be completed by end-1990. (b) 50,000 lines (GuatemalaCity). This new project provides for expansion of local exchange services in the central and northern areas of Guatemala City not covered under the 1984-87 program. Three new digital exchanges of 50,000 lines total capacity will be installedwith associated junction and subscriber cable networks; two old local exchanges retired and the existing local network in these areas rehabilitated;the national trunk exchange expanded and the analog international exchange replaced. Demand satisfactionis expected to increase to 77 percent and the quality of service in Guatemala City is expected to improve considerablywhen the project is completed in the early 1990's. The project cost is estimated at US$58.1 million equivalent with a foreign exchange component of US$44.0 million equivalent. (c) Rural Telephone Expansion, Phase IV. This project would provide for extension of telephone service to about 462 communitieswith populations over 1,000 inhabitants and to all municipal headquarters presently without telephone service. Estimated project cost is US$16.1 million equivalent, with a foreign exchange component of US$14.5 million equivalent. d) 250,000 lines (1990-95 Investment Program). This program aims to satisfy a substantial portion of the demand for telephone service in urban areas by 1995. Program cost is expected to be around US$267.0 million equivalent. However project details, implementationschedule, and financing arrangements remain to be worked out. - 49 - Table 5.3 Communication Sector Investment Program, 1988-91 (Q Million) 1988 1989 1990 1991 Totals Estimated -- Programmed ------ Ministry of Public Works 1.3 2.1 2.2 2.3 7.9 GUATEL Expansion of Metropolitan System 21.2 33.7 71.1 59.6 185.6 Expansion of Regional and 18.5 60.4 58.5 112.9 250.3 Rural Systems International Service - 7.1 2.1 1.3 10.5 Other 9.P 25.8 23.0 24.0 82.6 TOTAL 50.8 129.1 156.9 200.1 536.9 Source: Statistical Appendix, Table 2.6 Financing Plan 5.13 Sources of financing for GUATEL's investments over the period 1988-91 are shown in Table 5.4. Local costs will be met through internally generated funds. Foreign exchange costs of ongoing works will be met by IBRD and IDB loans, suppliers' and bilateral credits and GUATEL's internally generated funds. The 50,000-line expansion is being financed through an OECF loan of US$47 million equivalent covering the full foreign exchange costs. Continued expansion of the rural telephone network is expected to be financed by IDB. Sources of financing have not yet been identified for the 250,000-line expansion program, for which disbursements are expected to start in 1990. Financing for other works would be through multilateral sources or internally generated funds. Table 5.4 Proposed Financing Plan, 1988-91 (Q Million) Source of Financing Local External Total World Bank -- 42.9 42.9 IDB 505 50.5 OECF -- 72.7 72.7 Supplier's/bilateral credits -- 66.9 66.9 GUATEL 243.2 -- 243.2 Unidentified -- 60.9 60.9 Total 243.3 293.6 536.9 Source: Statistical Appendix, Tables 2.6 and 2.11 - 50 - Conclusions and Principal Recommendations 5.14 Planned investments in telecommunicationsconstitute about 13 percent of public sector investment for the 1988-1991 period reflecting both the relatively high cost of expanding and modernizing the system and the urgency of moving rapidly to improve the current poor level of service and begin to satisfy the high level of unmet demand. Poor telecommunicationshas a direct negative impact on efforts to accelerate economic growth and support the country's export drive. Accelerating investment in the sector is therefore urgent. Nevertheless,the very high level of investment planned for the sector will not materialize in the timeframe proposed without a major effort on the part of GUATEL to strengthen project management and accelerate efforts to secure the substantial additional financing required. At the same time, action is needed to improve overall management of the sector, with particular emphasis onii) increasing the participation of the private sector in the provision of specialized services in the sector, while also encouraging the use of private contractors to speed constructionof the network; and ii) revising the domestic tariff structure, since continued low tariffs reduce the quality and efficiency of telecommunicationsservices. - 51 - CHAPTER VI: WATERSUPPLY SECTOR Sector Overview 6.01 Increased investment in the Water Supply Sector by the Government as well as by NGOs over the past '5 years has resulted in a substantial improvement in access to water and sanitation, with overall service levels increasing from 37 to 51 percent for water and from 22 to 43 percent for sanitation since 1974. Nevertheless,Guatemala continues to rank well below other countries 'n Latin America in terms of water supply service levels. In 1987, about 4.2 million people (one-half of the population) still had no access to public water supplies and about 4.8 million lacked access to adequate sanitation (See Table 6.1 below). Moreover, there are wide variations between urban and rural areas, with 60 percent of the urban population having access to house connections and only about 6 percent of the rural population receiving the same level of service. The quality of the water also remains poor, especially in the secondary cities and smaller communities reflecting poor protection of water sources and ineffectiveor non-existent treatment. For additional comparative data on service levels see Statistical Appendix Tables 3.8 and 3.9 Table 6.1 Water Supply and Sewerage Sector Service Levels All areas Urban areas Rural Areas Total % 2 z Population! Served Served Served Water Supply Actual 1987 8.4 51 82 28 Expected 1990 9.0 52 79 31 Estimated Goal 12.0 83 90 75 Year 2000 Sanitation Actual 1987 8.4 43 66 27 Expected 1990 9.0 47 64 33 Estimated Goal 12.0 83 90 75 Year 2000 1/ Millions of inhabitants Source: World Bank and PAHO sector reports 6.02 Institutionalresponsibility for the sector is fragmented among many agencies at the Central Government and local levels, with agencies at the national level mostly responsible for project preparation and evaluation, as well as, constructionsupervision, while local entities handle system operations and maintenance as well as tariff setting and collections. The principal entities involved with Guatemala City include the Empresa Municipal de la Ciudad de Guatemala (EMPAGUA), a semi- autonomous arm of the Municipality of Guatemala City, which furnishes water to the Municipality and a few adjacent suburban neighborhoods,and recently - 52 - took over responsibilityfor operation of the city's sewage system as well; and an executing unit in the Ministry of Public Works, which is responsible for constructinga major pipeline for Guatemala City plus associated treatment, storage, and disttibution facilities (Xaya Pixcaya National Water Supply System). Additional services are provided by various municipalities in the surrounding suburban areas, as well as by a number of privately owned entities, the largest of which is the Compania de Agua Mariscal, which administers about 15 percent of house connections in the capital. 6.03 Water and sewerage services outside the Metropolitan area are provided by INFOM, an autonomous agency of the Government, which plans, finances and implements public works projects in secondarymunicipalities. About 60 percent of its lending and techniicalassistance has been allocated for water and sewerage projects. The Department of Water and Sewerage (DAYA) of the Ministry of Public Works, also designs systems for eventual funding by INFOM. Operation and maintenance of urban water and sewerage systems in secondary municipalitiesis the responsibilityof the municipalities themselves, although INFOM provides technical support as well as acting as a purchasing agent for materials and supplies for maintenance. 6.04 With respect to services in rural areas, primary responsibility rests with the Ministry of Health. It has two agencies under its jurisdiction, the Executing Unit for Rural Water Supply (UNEPAR),and the Division of Environmental Sanitation (DSA). UNEPAR is semi-autonomousand is responsible for planning, constructing (through private contractors)and supervising potable water projects in rural communitieswith populations of more than 500 inhabitants. Some of UNEPAR's projects are operated and maintained by community water committees, and some by UNEPAR itself. DSA, a division of the Ministry of Health, is responsible for the design and constructionof water systems in dispersed rural areas, with populations under 500. DSA also manufacturesand distributes latrines, provides hygiene education and inspects food processing enterprises. Village water committees operate and maintain the systems DSA constructs. Key Sector Issues 6.05 Low service levels reflect existing financial, institutionaland legal constraints,which have led to low levels of investment. With respect to sector financing, overall cost recovery for the sector from consumers is negligible. This lack of cost recovery leads to waste, lack of accountabilityfor operating performance and puts an undue financial burden on the Central Government. Except for Guatemala City, water tariffs are too low to cover operating and maintenance costs, let alone contribute to debt service and a share of investment. Sewerage tariffs are generally not charged. Tariff structures are based on an antiquated water title system with i) monthly water entitlements,which are too large and discourage water conservation,and ii) high entry costs which are a barrier to low income consumers. 6.06 Investment in the sector is further constrained by a fragmented institutional structurewhich results in a lack of sector-wide policies and norms, inefficient construction,and severely deficient operations and maintenance. Most agencies have capable staff. However the absence of - 53 - institutionswhich provide a stable working environment and long term career opportunities discourages the participationof professionals and technicians, especially outside of Guatemala City. Sector development is also handicapped by the lack of any sectoral agency responsible for investment planning and sector policy. SEGEPLAN the inter-sectoral planning agency and COPECAS, an associationof major agencies in the sector, only provide very general guidance. More recently, the Government has established a new coordinatingbody (CONAGUA) to help accelerate investment in the sector as part of the Program of National Reorganization. CONAGUA includes all major sector institutionsas well as representatives from the private sector and NGOs. Although CONAGUA offers an excellent opportunity to improve coordinationand planning in the sector, major institutionalchanges are still needed to reduce the existing institutional fragmentation and minimize unnecessary duplication and overlapping of responsibilities. 6.07 A water law is also needed to effectively allocate and protect water resources. Lack of legislationhas led to the indiscriminateuse of scarce water resources by private interests,while also restricting public access to springs and other sources. Domestic, industrial and agricultural pollution has also gone unchecked. The new Constitutionplaces all water under public ownership and calls for the promulgationof a special law to regulate water resources. A draft of this law has been prepared but has yet to be approved by the Guatemalan Congress. Moreover, it still needs to be complementedby regulations to provide for its enforcementonce approved. Programmed Investments (1988-1991) 6.08 Estimates of planned investments for the 1988-1991 period (Table 6.2 below) total Q 314.2 million. These estimates do not include additional water supply and sanitation investments that could be funded out of the 8 percent share of revenues earmarked for municipalitiesor under the proposed Social Investment Fund. The planned investment levels are probably overly optimistic given the sector's limited implementation capacity. A brief description of the investment program by agency is given below. - 54 - Table 6.2 Water Supply and Sanitation - Estimated Investments (Q million) 1988 1989 1990 1991 Totals Estimated ------Programmed ------ EMPAGUA 4.4 8.6 21.2 26.7 60.9 Ministry of Public Works Xaya-Pixcaya 7.4 7.2 - - 14.6 Other 0.7 2.2 1.2 1.2 5.3 UNEPAR 28.8 32.1 23.1 34.4 118.4 DSA 10.2 11.3 10.2 9.5 41.2 INFOM 5.4 7.5 12.5 40.0 65.4 Ministry of Development 1.9 2.0 2.2 2.3 8.4 TOTALS 58.8 70.9 70.4 114.3 314.2 Source: Ministry of Finance and World Bank estimates EMPAGUA 6.09 EMPAGUA's planned investment program for the 1988-91 period totals Q 60.9 million, of which approximatelyhalf consists of expenditures programmed for the IBRD financed rehabilitationproject, which is now expected to get underwav in 1989, following approval by the Guatemalan congress in mid-1988. This project focuses on operational improvementsto the water system, including replacementof house connections and minor distributionmains, and installationof water meters; system expansion through constructionof new wells; and technical assistance and training to help strengthen EMPAGUA's managerial and institutionalcapacity. Other ongoing investments include a pumping station improvement project financed by CABEI which is nearing completion; a proposed well drilling project currently under preparationwith possible Japanese funding; and a distributionsystems study planned to be initiated in 1988 with French financing. Ministry of Public Works 6.10 Estimated investment expenditures in the water supply and sewerage sect-r for the Ministry of Public Works total Q 19.9 million for the 1988-1991 period. About two thirds of this amount would be utilized by the Xaya-Pixcaya unit in the Ministry of Public Works, which is constructinga major pipeline for Guatemala City, plus associated treatmenc, storage and distribution facilities, in order to utilize the Xaya and Pixcaya rivers to provide additional water supplies to the metrop litan area during the dry season. The remaining resourceswould be util:zed for urban and rural water supply and sewerage constructionas well as for basic hydrological studies. - 55 - 6.11 The first stage of the Xaya-Pixcaya project, including canals and treatment plant has been completed,with constructioncurrently continuing with the first part of the second stage. This stage includes i) doubling the number of steel pipes and sifons and expanding the treatment plant Lo de Coy; and ii) additionalwork to expand the capacity of the main canal. Construction of the first part of stage two is expected to be completed in 1989. Despite its advanced state, the project appears to be moving forward without the benefit of sufficienthydrological studies needed to develop a safe water supply source for the expanded facilities. As currently designed, plant capacity would only be partially utilized during the short periods of peak flow in the Xaya-Pixcaya river. Since further studies are needed to define and develop adequate water sources for the expanded plant, completion of the expansion could be delayed pending further analysis of water resource availability. The unit is also considering a further project to develop the Guacalate river, with initial work on a feasibility study getting underway during 1988. The proposed project will require very careful analysis given the expected high cost of the project, the problems associatedwith heavy pollution in the river, as well as the need for a costly relocation of coffee processing plants. INFOM 6.12 INFOM's investmentprogram in the water supply and sewerage sector is estimated to total Q 65.4 million for the period 1988-1991, however INFOM's ability to achieve this investment level will depend heavily on the availabilityof external financing, especially INFOM's ability to initiate implementationof the proposed follow up IDB project during 1990. INFOM's efforts in the sector over the next few years can be broken down into three main programs. First a small on-going program of credit for municipal water supply works financed from INFOM's own resources. Second, the on- going Water Supply and Sewerage Project financed by IDB which includes financing for the constructionor expansion of 14 water supply systems and 3 sewerage systems in 15 secondary cities. This project was expected to be completed in 1988. However INFOM will continue the project over the next two years using previously uncommitted funds to finance some additional works. The third project would be a follow up water supply and sewerage project also with financing from IDB. It would finance a portion of the investments identifiedunder a National Water and Sewerage Plan covering 330 municipalitieswhich was completed in late 1988 utilizing IDB technical assistance firnancing. INFOM is expecting to complete negotiations for this new project in time to start constructionof new works under the project in 1990. UNEPAR 6.13 Investments in water supply and sewerage programmed by UNEPAR for the four year period through 1991 total an estimated Q 118.4 million. These investments consist of small rural water supply projects throughout - 56 - Guatemala, including both new construction as well as the repair and reconstructionof older systems. These projects are funded in part under the IDB financed Fourth Rural Water Supply Project,1 with additional funding from USAID, the Federal Republic of Germany (KFW), France, and CARE. During 1988, UNEPAR managed about 200 small projects, with an additional 200 projects in other small communities planned for 1989. A follow up Fifth Rural Water Supply project is under preparation and could be initiated in 1990, assuming satisfactoryprogress in completing the on- going Fourth Project, which is now expected to be comple-.edduring 1989. This project is also proposed for IDB financing. UNEPAR's ability to achieve the substantiallyhigher investment level programmed by 1991 assumes good progress in completing negotiations for the follow-up IDB project as well as a rapid start on implementation. Division of Environmental Sanitation (DSA) 6.14 The investment program for the Division of Environmental Sanitation (DSA) for the period 1988-1991 totals Q 41.2 million, assuming continued funding through USAID. DSA's investmentprogram provides for the construction of rural water supply systems and the construction of latrines as part of an integrated community health program. DSA's 1988 program provided for i) preparatorywork and/or construction of 135 small water supply systems in the departments of Totonicapan,San Marcos, Solola, Huehuetenango,Quiche, and Quezaltenango,and ii) construction of latrines in 115 small communities in the Departments of Quezaltenango,Quiche, and Huehuetanango. This investment effort is being continued in 1989, with ongoing and new works programmed for about 140 small communities in the same departments. Both the water supply and latrine construction programs are fully financed by USAID grant and loan funds. Conclusions and Principal Recommendations 6.15 Although planned investments in water supply and sanitation are fully justified, the level of investment (7.0 percent of total projected public sector investment) remains low in comparisonwith sector needs. There is therefore, an urgent need to expand investment in the sector over the medium term. With spending levels at only about 0.3 percent of GDP in 1988, there is considerable room for improvement. A possible medium term objective would be to seek to increase investment levels to between 0.5 and 0.6 percent of GDP by 1995. To do so, however, will require a sustained effort to address sector financial, legal and institutionalconstraints. Key recommendationsfor sector adjustment are summarized below: 1/ The Fourth Rural Water Supply Project, financed by IDB and approved in June 1983, includes i) the constructionof 110 water supply pipelines in rural communities to expand the provision of water supply; ii) rehabilitationof 90 existing facilities;and iii) strengtheningof UNEPAR's capacity to provide adequate maintenance of water supply systems already in operation. After undergoing considerable initial delays this project is now expected to be completed in 1989. - 57 - a. With respect to sector finances, a major effort is needed to mobilize additional domestic resources for investment and operation of water supply and sanitation systems, both to increase investment and reduce the current heavy dependence on external financing (over 75 percent of projected investment for the 1988-1991 period), as well as ensure adequate maintenance. This will require the implementationof adequate cost recovery policies in the sector, including increasingwater tariff levels and reforming the antiquated water title system. In large communities, sufficient cash should be generated internally to cover operations, maintenance, debt service, working capital needs and a portion of the investment program. In smaller communities, consumers should pay charges which, as a minimum, cover operations and maintenance. Additional financing for investment should be made available by the Government through loans to larger communities,with grants limited to small communities. b. Although the recent establishmentof CONAGUA is expected to improve overall sector coordination,the expansion of water and sanitation services will also require a major reorganizationof the sector to consolidate and restructure sector institutionsto improve planning, finance and operations and maintenance and to end the institutional fragmentationwhich reduces sector efficiency. The proposed institutional structurewould involve: i) the creation of Central Government entities for both water resource allocation and for sector investment planning; ii) the consolidationof all agencies dealing with rural water supply into one entity; and iii) continuationof the current system of rural water committees with increased technical support. Such an institutionalframework would greatly strengthen overall coordinationof the sector and improve project implementationwhile still providing ample room for enhancing local community participation in improving water and sanitation services. c. Early approval of the draft water law by Congress is needed to effectively allocate and protect water resources. At the same time, regulationsneed to be drafted to provide for effective enforcement, which is essential if the current indiscriminateuse of scarce water resources is to be stopped and the quality of Guatemala'swater preserved. d. In defining and preparing future investment in the sector the following objectives should have priority: i) extending water supply to the poor fringe areas of Guatemala City and Escuintla and Quezaltenango; ii) supporting efforts to improve water quality, reduce unaccounted for water and rehabilitateexisting water systems; ii) further extending water and sanitation services in rural areas, emphasizing low cost technology and community participation; iii) protecting water supply sources in the Guatemala City area from contamination,possibly including solid waste management for Guatemala City and an expanded reforestationeffort; - 58 - iv) providing treatment for toxic industrialwaster and domestic sewerage in areas where surface water contamination directly affects community water supplies; and v) supporting institutionbuilding through training, technical assistance, equipment and supplies. e. The proposed Social Investment Fund, by opening up new channels for sector financing and technical assistance could make a major contribution to expanding sector investment levels and improving access to water and sanitation services, especially in the rural areas. - 59 - CHAPTER VII: THE SOCIAL SECTORS (Health and Education) Introduction 7.01 Guatemala's provision of public social services and its efforts to meet basic needs have been inadequate to satisfy the requirementsof its rapidly growing population. InsufficientGovernment efforts over the past three decades--compoundedby low public revenues and a stagnant economy in the early part of the 1980s--have led to declining real per capital social expenditures. As a consequence,key health indices are worse than many countries in Latin America, and literacy rates remain among the lowest in the continent (see Table 7.1 below). Similarly, there has been slow progress in both poverty alleviation,especially in the rural areas, and in the reduction of income disparities. Table 7.1 Selected Social Indicators Other Middle Income Countries in Latin America Indicator Guatemala Average Range Life Expectancy (years) 61 66 60-74 Infant Mortality Rate 65 46 17-73 (per thousand) Population per physician 8.6 2.3 1.5-2.9 School Enrollment Ratios' Primary 76 104 70-122 Secondary 17 47 24-69 Adult Literacy Rate2 55 80 60-90 1/ Percentage of school age children enrolled in primary and secondary schools. 2/ 1980 data except for Guatemala (data for 1984-85). Source: Statistical Annex, Table 3.10. 7.02 Over the past three years the Government has initiated a major effort to better address the country's long standing needs in the social sectors. In addition to reinforcing and beginning to expand public sector programs in health and education, the Government is also exploring actions to open up new channels for improving services and support for the poor, including additional support to municipalities,NGOs, cooperativesand other private sector associationswithin the framework of a proposed Social Investment Fund. Nevertheless, despite considerableprogress in redefining - 60 - priorities and initiatingnew programs, the task is an arduous one and much more needs to be done. This chapter examines basic sector needs and constraints in health and education, including a review of proposed investments and other expendituresas well as financing requirements. Housing and urban development issues are analyzed in Chapter VIII. Water supply and sanitation investments,which are also essential for improving health conditions, were reviewed in Chapter VI. A. Health Sector Needs, Investment Program, and Financing Health Sector Overview 7.03 The health status of the Guatemalan population is very deficient. Infant mortality (65 deaths per 1000 live births) and maternal mortality, (1.2 per 1000 live births) are high when compared with other Latin American countries at a similar stage of socioeconomicdevelopment. The fact that contagious diseases and d4seases associated with poor hygiene and malnutritionare among the main causes of death, further underscores the poor health status of the population. Mortality among children is also high (15 per 1000 children under five), with most deaths easily preventable through better sanitation and vaccination and basic primary health care. Over 50 percent of children deaths are related to intestinal and respiratorydiseases brought on by the lack of potable water and sewerage facilitiesand poor housing conditions. 7.04 The Ministry of Health (MSP) and the Social Security Institute (IGSS) are the public sector health care providers,with IGSS covering about 8 percent of the population and the Ministry nominally responsible for about 80 percent of the population. In practice, however, MSP services remain quite limited in scope, reaching only about 2 million people or less than 30 percent of its constituencywith regular health care services. This reflects in part the lack of roads in remote areas making access to medical services extremely difficult. It also reflects inadequate sector management and financing. In addition to MSP and IGSS health care, private sector medical services cover about 6 percent of the population, with a similar share of services being provided by the armed forces to their members. Non Governmentalgroups, including churches provide coverage for about 1 percent of the population. The overall provision of services remains highly skewed, with a high concentration of services in the Guatemala City area and only minimal coverage in many of the outlying regions. 7.05 The Government'sProgram of National Reorganizationstresses the importanceof primary health care, noting that Government programs to date have i) concentratedon curative care with little attention given to preventivemedicine; ii) have resulted in little overall improvement in health indicators, despite substantial resources spent on hospital care; and iii) have produced a heavy concentrationof health services in the urban areas in detriment to the rural areas. The Government'spolicy objective of emphasizing primary health care is clearly appropriate. However, achievement of this objective will require further changes in how the sector is administeredand financed. - 61 - Key Sector Issues and Expenditure Priorities 7.06 The difficultieswhich the Government faces in trying to provide satisfactoryhealth care, reflect not only inadequate funding for the sector, but also inefficientutilization of existing resources combined with continued over emphasis, at least in practice, on more expensive curative care over basic primary health care. Primary health care has received only about one-fourth of current expendituresand less than one fifth of capital expenditures in the last few years. The bias towards urban hospital based health care, has also resulted in an emphasis on training more specialized health personnel, rather than concentrating resources on the training of more urgently needed auxiliary, community and health promoter personnel for rural areas. The adequate provision of primary health care services is further restrictedby the centralized administrationof the health care system, with most decisions on supplies and personnel taken in Guatemala City, often with considerabledelay. Increasing the availabilityof resources for preventivemedicine and primary health care is by far the most cost effective means to improve the overall health of Guatemala's population. Comparative data from developing countries indicates that the cost of saving one life through preventive care is 5 to 10 times less than the cost of curative care per each life saved. 7.07 Poor hospital administrationhas also led to an explosive increase in current expenditures for curative medicine, which almost doubled since 1986 (see Table 7.2). Although overall utilization of beds in MSP hospitals appears adequate, about 60 percent of all cases treated in hospitals could have been treated more cheaply and more effectively in health posts and rural health centers. Poor allocation of exis.ing resources has resulted in a disproportionateshare of expenditureson personnel, with only modest amounts allocated for needed goods and services and only about one-fifth of what is needed allocated for maintenance and equipment. - 62 - Table 7.2 Ministry of Health: Current Expenditures For Preventive and Curative Medicine, 1985-1988 (Q Millions) 1985 1986 1987 1988 Total Financ'ng 46.9 50.0 72.6 97.9 A. Preventive Medicine - Sanitation 0.8 u.7 0.8 1.1 - Epidemilogy 3.8 3.9 8.4 9.6 - Health Centers Type B & Health Posts 6.5 6.9 9.2 13.7 Total 11.1 11.5 18.4 24.4 B. Curative Medicine - General Hospitals 32.6 35.2 49.8 67.5 - Specialized Hospitals 3.2 3.3 4.4 6.0 Total 35.8 38.5 54.2 73.5 Source: Ministry of Health, Unit of Planning and Budgeting 7.08 Although total Central Government budget allocations for the Health Sector increased from Q 127.4 million in 1980 to an estimated Q 251.7 million in 1988, expenditures as a percentage of GDP have actually fallen from 1.6 percent of GDP in 1980 to about 1.3 percent of GDP in 1988. This level of spending remains substantiallyless than allocationsmade in other Latin American countries of similar socioeconomicprofile. Since the share of health expenditures in total expenditures is not unduly low and in line with other middle income countries, the low level of expenditureson health reflects the relatively low level of total Central Government resource mobilization and expenditure. 7.09 Increased resources will be essential over the medium term if Guatemala is to improve the overall quality of health care and the health status of its population. However, initial efforts should focus on a better allocation and use of existing resources. This is particularly important since available resources are unlikely to grow quickly in the next few years taking into account on-going resource constraints. There are five basic expenditure allocation issues. First, the continuing bias towards curative care needs to be reversed. This will involve shifting more resources towards primary health care, including increased allocations for less costly health technicians,coupled with a gradual reduction in the number of physicians assigned to large urban hospitals and a major effort to revamp hospital administrationand ensure more efficient and cost effective provision of hospital services. Second, as indicated in part above, MSPs staffing profile needs to be revamped to provide a more - 63 - efficient use of resources. The present staffing pattern, with its predominanceof high cost physicians,has an insufficientnumber of nurses and paramedical personnel. Third, the overconcentrationof services in the capital area needs to be corrected by increasing substantiallythe amount of resources allocated to the rural areas. Fourth, coordinationbetween MSP and IGSS should be strengthenedto avoid duplication of facilities and permit an exchange of services in cases where there is excess capacity. Fifth, allocations for maintenance and essential supplies need to be increased. Neither primary or curative health care facilities have adequate funds for operations and maintenance. Government's Program 7.10 Recognizing the need to better address the sector's underlying constraints, the Ministry of Health has initiated efforts to improve coverage, provide better nutrition, tackle basic sanitation and overall health environment issues, and strengthenmanagement of the sector through decentralizationand more efficient use of resources. With respect to primary health care and preventivemedicine, the Ministry is expanding programs of fluoridation,provision of vitamin A to children, and control of transmittablediseases such as malaria. It is also expanding training of health care technicians and community health care workers, including the training of about 4,000 rural health care promoters. Other programs to improve the coverage and effectivenessof health care include public health education campaigns and the provision of essential medicines through state pharmacies and other non-profit establishmentsto help ensure adequate access to medicine at reasonable prices. Nevertheless,much more needs to be done to better coordinate a wide variety of Ministry programs, while also improving targeting and cost effectiveness. 7.11 As a result of these and other complementaryefforts, the Government estimates that overall health indicatorshave improved, noting that the rate of infant mortality has fallen from a level of 79 in the early l980s to 65 per thousand in 1988 and that the level of maternal mortality has fallen from l.e to 1.2 per thousand live births. Progress has also been made in expanding vaccination programs. Polio vaccination coverage, for example, has increased, according to Government estimates, from 14 to 40 percent. Proposed Investment Program, 1988-91 7.12 As in previous chapters, the subsequentanalysis focusses on the the health sector investmentprogram, although the distinction between investmentand current expenditures in the social sectors, especially in health and education, is somewhat of a false one. More broadly defined, social investment in the health sector includes not only capital investments,but also maternal and child health care programs, family planning, public health education, and nutrition programs, most of which are funded under the current budget. In addition to the above, the Ministry of Health also manages rural water supply and sanitation investments as discussed in the previous chapter. 7.13 The proposed investment program in the health sector is summarized in Table 7.3. It includes investmentscarried out by MSP, the Ministry of Public Works, and IGSS, and totals Q229.6 million over the period 1988-91. - 64 - The bulk of programmed investments (65Z) would take place in 1988 and 1989, reflecting the completion of major ongoing investments in hospital construction and equipment. Resources allocated for health centers and health posts average Q 9.0 million over the period, although this level of investment could be increased considerablyin 1990 and 1991 if preparation of a program of rural primary health care can be accelerated as currently proposed by the Ministry. Funding allocated for preventive health care (immunizationand infant survival) is only budgeted at an average level of about Q 8.0 million during the period, but should be increased over the medium term. A more detailed discussion of the investment program in the Health Sector follows: Table 7.3 Health Sector-InvestmentProgram (1988-1991) (Q million) 1988 1989 1990 1991 Health Centers and Posts 8.6 14.7 6.4 6.6 Immunizatioa and Infant 7.0 8.5 8.5 8.5 Survival Rural Primary Care - - 11.0 11.0 Construction and Repair 19.2 40.7 0.5 0.5 of Hospitals Hospital Equipment 17.0 8.2 - - Specialized Medical Care 0.2 - - - IGSS Facilities 13.1 10.0 10.0 10.0 Other 1.9 1.0 3.0 3.0 TOTALS 67.0 83.1 39.4 40.1 Source: Budget Office, Ministry of Health, and World Bank estimates Ministry of Health 7.14 Curative Health Care. Once the ongoing IDB financed project for construction and equipping of hospitals and specializedclinics is complet.edin 1989, together with the provision of additional equipment financed under a French protocol, no new investments of this type are required in the next tnree to four years. Indeed, new hospital infrastructuremay not be required even beyond this period since overall hospital bed availability in the country (including IGSS and the private sector) appears sufficient to meet projected needs, assuming provision of servioes and hospital administrationis rationalized. Existing old and deter -ated hospital infrastructureand equipment could be gradually replaced or rehabilitatedby increasing existing very low user fees and utilizing funds from personnel vacancies which are ,.otfilled. - 65 - 7.15 Primary Health Care. A minimum program for replacementand equipping of existing primary health care infrastructure (HealthCenters, Type B and rural posts) should be continued during the next three years to ensure, as a mlnimum, that coverage is not reduced. This would require replacing 36 health posts and 8 health centers per year, with an annual cost of about Q10.0 million per year, which is very modest compared to expenditures on hospitals in recent years. Should additional resources be made available, this program should be expanded once a more detailed inventory of existing infrastructureand additional needs is carried out. In fact, the Ministry is in the process of preparing an expanded rural primary care program which it proposes to initiate in 1990. Gross estimates indicate that of the existing 780 rural posts and 216 health centers, about 200 posts lack their own facilities with most of such posts functioning in rented property without equipment, running water or electricity. In addition, close to 45 percent of these poorly maintained rural posts and health centers are now over 10 years old. 7.16 Preventive Health Care. The existing program of immunization should be maintained at least at the level shown by acceleratingefforts to reach agreement on and then utilize a proposed USAID grant of $16.2 million. Other programs such as those for the construction of rural water supply aqueducts and latrines which are also financed with USAID assistance (See Chapter on Water Supply and Sanitation) should also be continued at least at their present levels over the next three years. Social Security Institute (IGSS) 7.17 The investment budget proposed by IGSS for 1988 totals '13.1 million, mainly for the repair, improvement,and constructionof hospitals and other facilities to improve service. This level of investment could be reduced to about Q10 million per year for the next few years, provided the need for new or rehabilitatedhospital infrastructureis minimized through better utilization of existing public and private hospital facilities. One option for improving utilization of facilitieswould be to establish a system permitting IGSS patients to select the doctor or facility of choice from an agreed list, with payment being made by IGSS to the institution or doctors involved. The lower level of investment expenditu es would also be consistent with the expected reduction in transfers from the Ministry of Health to IGSS. - 66 - Table 7.4 IGGS: Projection of Revenues and Expenditures,1998-1991 (Q Millions) 1988 1989 1990 1991 A. Revenues 1. Current 247.8 267.7 289.1 312.2 2. Capital 35.0 33.7 35.6 37.6 - Transfers from (30.0) (30.0) (30.0) (30.0) Ministry of Health Total 282.8 301.4 324.7 349.8 B. Expenditures 1. Current 269.8 291.4 314.7 339.8 2. Capital (Investment) 13.1 10.0 10.0 10.0 Total 282.9 301.4 324.7 349.8 Source: Ministry of Finance and World Bank estimates B. Education Sector Needs, Investment Program and Financing Education Sector Overview 7.18 Guatemala's education system has grown rapidly over the past 20 years, with public primary enrollment nearly trebling and public secondary enrollment more than quadrupling from 1965 to 1985. However, Guatemala still has a long way to go in order to meet the educational,social alnd economic needs of its people. The educational profile of the population is among the least developed in Latin America when compared to other countries with similar income levels. The overall literacy rate is low, 55 percent on average and less than 15 percent in some rural areas. Over two-fifths of the labor force has no formal schooling, another quarter only 1 to 3 years of schooling; and another one fifth, 4 to 6 years. Only 30 percent of managers, technicians and professionalshave attended institutionsof higher learning. 7.19 Education in Guatemala faces special challengesgiven the ethnic complexity of the society, one of the most diverse in Latin America. About one half of the population are Indians, descendents of the Mayans. They speak as many as 23 different languages, although most speak one of four major languages--Mam,Kekchi, Quiche, or Cakchiquel. Although Govprnment efforts to better integrate the Indian population into the education system - 67 _ and hence into the mainstream of economic life were expanded in the early 1980s under a bilingual education program, the majority of the Indian population continues to speak little Spanish and remains isolated from the economic life of the country. Key Sector Issues 7.20 Guatemala's poor educational profile results from a long tradition of under-investmentand improperly directed investment in education. Until recently, less than 2 percent of GDP was being spent on education compared with an average expenditure of 4.5 percent of GDP in other developing countries. Although programmed expenditures for 1988 would increase spending slightly to 2.4 percent of GDP, expenditureson education remain inadequate. At the same time, overall expenditure patterns have been inappropriate,with i) a disproportionatelylarge share of education resources going for higher education while almost 40 percent of the primary school age population remained uncovered; ii) only very limited budget support for non-salary costs, i.e. for textbooks, other teaching materials, maintenance, and pedagogical and administrativesupport; and iii) less than 10 percent of the budget--mostly financed with external financial assistsnce--devotedto direct investment in the sector to expand coverage and improve learning conditions. 7.21 The very low level of resource allocation and the lack of priority given to the lower grades of schooling are largely responsible for the basic issues facing the sector. These include: a. Low Efficiency. The education system has been poorly managed, as reflected in the poor utilization of facilities, and high repetition rates (almost 50 percent in the lower primary grades). b. Low Quality. The instruction offered has often been of poor quality given unsuitable curriculum, and unqualified teachers, as well as inadequate physical facilities and instructional materials, especially in primary education. c Low Performance. The overall performance of the system has also suffered given the above problems, as illustratedby the inefficient flow of students and poor student achievement rates in primary school. Only about 58 percent of children aged 7-14 years attend school on average, with the percentage falling to about 32 percent in rural are3s. At the same time unit costs per pupil in primary school remain extremely high. d. Inequality of Opportunity. The system of education also suffers from major inequalities,with only one of three children in rural areas receiving some primary education and only a very small proportion benefiting from secondary or higher education. The special education needs of the Indian population are only partly addressed by current efforts to expand bilingual education. At the sa,netime, the lack of an adequate cost recovery system in higher education, limits the Government's ability to allocate additional resources to better meet the needs of the rural population. - 68 - Government'sProgram 7.22 Recognizing the serious issues in education facing the country, the Government's Program of National Reorganizationemphasizes the need for a fundamental reform of Guatemala's education system, noting the poor coverage and quality of the existing system as well as the inappropriatenessof the curriculum. More specifically,the Government's program current program in the sector stresses the need to: i) adapt the system to better fit the social and cultural realities of the country; ii) double the budget of the Ministry of Education by 1995 with the objective of expanding coverage to about 90 percent of children of primary school age, while also providing adequate teaching materials and other school supplies; iii) continue with the program of regionalizationand decentralizationboth to improve administrationand better use of resources, as well as to ensure that the education provided meets local and regional needs; iv) expand the coverage of the National Program for Bilingual Education: v) reinforce the literacy campaigns being managed by the National Committee for Literacy (Comite Nacional de Alfebetizacion- CONALFA), as provided for in the Constitutien;and vi) strengthen the role of non-formal education in both complementing the formal education system, but also in helping meet the specific needs of different regions and socio- economic groups. Recent Trends in Public Expenditures 7.23 Consistent with the increased priority being attached to education, overall public expenditures on education and training have been increasing in the past few years, with total programmed expendiLures increasing by 36Z between 1986 and 1988. Total expendituresby the Ministry of Education in 1989 are projected to be about 14 percent above the level of 1988, mainly due to higher wages and salavi.t:. At the same time, the investment program in the sector has progressively shifted its emphasis toward primary education, with more resourcas targeted toward the rural and poor urban population. In the early 1980s major internationalor bilateral development agencies supported education projects in secondary, technical and higher education. The focus of more recent projects has been on bilingual education (USAID), rural primary schooling (IDB) and the improvement of primary education in poor urban areas (IBRD). Recent projects approved by the Government confirm this pattern, including a nutrition grant from WFP w`ich has a school nutrition component and preparation of a Basic Education Project (EducacionMinima) aimed at expanding coverage and improving quality of schooling for the lower primary grades, in support of which a US$30 million loan was approved by IBRD in December 1988. - 69 - Table 7.5 Education Sector - Expenditures by Category (1986-88) (Q Million) Category 1986 1987 1988 (actual) (Approved) (Programmed) Wages and Salaries 182.7 263.0 227.8 Goods and Services 17.4 41.1 44.8 Leasing of land and buildings 0.7 0.8 1.1 Current Transfers1 48.5 69.3 93.2 Inivestment(Educ.Min) 7.1 18.3 18.4 Investment (0in.Public Works) 12.8 25.9 30.0 Other 0.3 0.1 0.1 T 0 T A L 269.5 358.5 415.4 11 Current transfers consist mainly of allocations for the University of San Carlos which received 93, 95 and 82 percent of indicated amounts respectively in 1986, 1987 and 1988, as part of constitutionally earmarked revenues. The bulk of these funds are used for wages and salaries. For 1988 an additional 14 percent of current transfers was allocated to the National Committee for Literacy. Source: Ministry of Finance, 1988 Budget. 7.24 Despite these positive development,,however, resource allocation and expenditures in education continue to confront serious problems. The share of higher education remains exceedinglyhigh (over 20 percent of total current expenditures in 1988), as shown in Table 7.6. At the same time, as shown in Table 7.5 above, salaries and allowances consume the bulk of the recurrent budget, thus leaving only a very small portion of resources for teaching materials and maintenance. To the extent that some improvements have been introduced in equipment, textbooks, and better trained teachers, these have generally come about as a result of programs and projects supported by external resources. The rates of implementationof ongoing investmentshave also remained very low (between 15 and 50 per-,ent). Based on preliminary estimates the rate of execution of the 1988 investment program in the sector was about 50 percent. This reflects a lack of counterpart funds, limited project management and implementationcapacity, and in somnecases ineffective leadership and lack of sustained commitment to carry out specific projects. Despite efforts to improve consistency, projects financed with external resources still suffer from a lack of adequate coordination and a unified approach to sector policy issues. This is particularly the case for rural school buildings (using local materials and community participation versus more traditional sub-contracting); learning-teachingstrategy for bilingual education; curriculim development and production of teaching materials; and pre-service versus in-service teacher training. - 70 - Table 7.6 Current Expendituresby Level of Education 1986-88 (Q Million) 1986 ? 1987 Z 1988 Z (Actual) (Approved) (Programmed) General Administration/ 87.2 35 116.2 37 117.4 32 Services Pre-school 3.6 01 3.9 1 4.7 1 Primary 82.7 33 86.2 31 117.2 32 of which urban 35.6 14 37.5 12 45.3 12 rural 44.3 18 55.7 18 65.0 18 adult 1.8 1 1.9 1 2.3 1 other 1.0 1 1.1 1 4.6 1 Secondary Education 26.0 11 28.7 9 33.7 9 Higher Ee'ication 45.3 18 65.8 21 76.3 21 Non-Formai Extraescolar) 2.4 1 2.1 1 16.8 5 Totals 247.2 100 312.9 100Z 366.1 100? Source: Hinistry of Finance, 1988 Budget. Proposed Investment/ExpenditureProgram 7.25 The Government'songoing and proposed investment program in the education sector is consistent with current sector priorities. It focuses on strengtheningprimary education coupled with efforts to improve planning, curriculum, and the availabilityof teachers and teaching materials. Ongoing projects include i) a Basic Education Project financed by IBRD and focusing on improving primary education in poor urban areas, including support for bilingual education and establishmentof a national textbook center (CENALTEX); ii) a Rural Basic Education Project financed by IDB which includes the constructionor reconstructLn and equipping of about 300 schools in rural areas together with training of teachers; and iii) a small project supporting decentralizationand improving bilingual education financed by USAID. The Basic Education Project is expected to be completed by 1990. The Rural Basic Education Project, approved in late 1982 has suffered serious initial delays although constructionwas initiated in 1988. 7.26 Other th;,na World Food Project for improved school nutrition, which will complement Government efforts to improve primary school attendance, the principal new project planned to get underway in 1989 and 1990 is a Primary Education Project for Rural Areas (EducacionMinima) wnich is being financed by IBRD. Implementationof this program will require an increase in counterpart funding over the next few years; strengthening of project managen,entcapacity and improved coordinationof donor support; and innovative approaches to mobilize local resources and community participation. The expected recurrent cost consequencesof zhe investment program are not likely to generate untolerabie pre3sures on the budget in the shortrun since a large proportion of the program is for the - 71 - repair, rehabilitationor replacementof existing schools. Nevertheless, a sustained expansion of primary educationwill require increased financing of teacher salaries beginning in the early 1990s. It is estimated that by 1994 or 1995 when the Government would bear the full cost of the additional teachers to be hired under the project, that an additional Q 25.0 million would need to be provided. 7.27 The planned education investment program (including school construction carried out by the Ministry of Public Works) for the period 1988-91 is shown in Table 7.7 below. Table 7.7 Education Sector - Planned Investments 1988-1991 (Q Millions) 1988 1989 1990 1991 rotalq Ministry of Education Planning and Programming 0.2 2.0 - 2.2 CENALTEX 1.5 6.6 2.7 - 10.8 Rural Primary Education 1.2 9.8 2.8 - 13.8 Ministry of Public Works (Construction,Expansion and Repair of School Buildings and Classrooms) Pre-primary 0.1 1.0 0.9 0.9 2.9 Urban prirmiary(marginal areas) 1.0 3.5 3.5 - 8.0 Other urban primary 1.5 4.1 2.6 2.6 10.8 Rural primary 12.6 10.2 6.5 6.5 35.8 Middle Schools - 1.7 2.7 2.8 7.2 Others1 - 0.6 - - 0.6 Construction Management - 2.4 1.6 1.6 5.6 (New Project) Basic Education - - 9.3 26.7 36.0 TOTAL 18.1 41.9 32.6 41.1 133.7 1/ Construction and repair of other schools and administrativecenters. Source: Ministry of Finance and World Bank estimates C. Conclusions and Principal Recommendations 7.28 Although rapid increases in public sector expenditures in both health and education are not feasible in the shortrun, given both resource constraints and limitations on project preparation and execution, it seems clear that over the medium term, the total level of expendituresin both sectors must increase substantially,while at the same time introducing - 72 - adjustments in the allocation of expenditureswithin each sector. At the same time, further efforts are also needed to increase local community participation in the funding and operation of basic health and education services, while also maximizing the impact of private sector and NGO supported programs. More specific recommendationsfor each sector are summarized below. Health 7.29 Expenditure adjustments in health should focus initially on the following. First, increasing the present share of recurrent expenditures allocated for primary and preventive health care by reducing the share allocated for curative care, thus moving the present ratio of 25:75 for preventive and curative care respectivelytowards a more balanced ratio of 40:60 over the medium term. Second, increasing the share of resources allocated to the rural areas, thus beginning to correct the cuirrentbias for Guatemala City. Both of these adjustments do not necessarily require major increases in overall allocations,but better and more cost effective use of existing staff while adjusting the mix of staff and physical resources. As such it is urgent that the Ministry of Health prepare specific plans for changing its manpower recruitment,training, and career development goals to begin redeploying staff to rural areas, while at time same time ensuring that maintenance and equipment and supplies for primary health rare are maintained at adequate levels. Increased emphasis on primary health care and preventive medicine remains crucial if the GoverLnmentis to begin to achieve its medium terms goals in the health sector of improving the overall health status of Guatemala. 7.30 Ir ddition to reallocatingresources to primary health care and preventive ;.edicine,it is also urgent that the Ministry of Health begin preparing an expanded investment program to be implementedduring the 1990s, including specific projects that could be available for external financing, with emphasis on increasing primary health care, while ensuring adequate maintenance and supplies for the operation of the entire health care system. Based on existing programming of investments,the overall level of investment in health will fall sharply in the next few years unless new investmentsare prepared urgently. 7.31 Even with the above changes, Guatemala's health status will not improve substantiallywithout increasing total budget allocations for health within the context of an overall increase in public sector revenues. As a medium term goal, the Government should aim at increasing the share of expenditures on health from less than 1.5 percent of GDP to at least 3.0 percent by 1995. This will require both increased budget support as well as increasing the share cf local communities in the development and financing of basic health services, coupled with higher user charges for hospital services. Education 7.32 Increasing the coverage and quality of education, with particular emphasis on primary education, will also require changes in the allocation of public expendituresas well as an expanded investment effort. First, the share of resources allocated to primary education will have to increase substantially if the country is to achieve its goal of providing a minimum - 73 - of 4 years of education to all children by the year 2000. This will require not only increased investment in new schools and classrooms, but improved management of existing facilities and teachers, as well a.' increased allocations for needed teaching materials. Second, the public investment program in education, particularly in primary education, will need to be expanded. This will require i) initiating soonest implementationof the Educacion Minima project with close attention paid to ensuring effective project management; and ii) initiating preparation of a follow up program in basic education to ensure continued and expanded investment during the 1990s. 7.33 To help finance the increased emphasis on primary education, the Government should consider steps to reduce the high share of resources currentlv allocated to higher education, with a greater portion of the cost of higher education being borne by the beneficiaries through increases in tuition, coupled with an expanded use of fellowships and student loans to ensure access of students from lower socio-economicgroups. At the same time, the overall share of public resources allocated to education must be increased over the medium term. This will require some increase in Central Government participation as well as increased use of local community resources. The overall goal should be to increase the share of resources allocated for education from the current low level of less than 2 percent of GDP to at least 4 percent by 1995. - 74 - CHAPTERVIII: HOUSINGAND URBANDEVELOPMENT Introduction 8.01 With a housing deficit of over 700,000 units and a large number of municipalitieswithout basic facilities, increasing investment in housing and urban facilities is a major Government priority. This chapter reviews sector requirementsand ongoing and proposed expenditure programs. As Housing Sector Needs, Investment Program and Financing Housing Sector Overview 8.02 The Government's Prugram of National Reorganization identifies the housing sector as one of the priority areas for accelerating investment efforts, noting that the private and public sector combinen currently cover only a small percentage of the housing deficit generated by the annual growth in population. This housing deficit is currently estimated at over 710,000 units, with the deficit increasing yearly by some 40,000 units. Since most families have at least some sort of roof over their heads, Government estimates of the country's housing deficit indicate the extent of very poor quality or substandardhousing. Effective demand for housing is significantly lower since real income levels for most of the population are so low that housing needs cannot easily be translated into demand. 8.03 The formal output of housing from both the publ:c and private sectors falls far short of needs. In 1985 this output amounted to only 3,000 units or about 7.5% of total new households for the year, and less than 1% of the accumulated deficit. Since 1986 this output has grown substantially,with the National Housing Bank (BANVI) alone producing almost 5,000 housing solutions in 1986 and 11,000 in 1987. However part of the increase is explained by the use of a broader definition for housing solutions to include not only basic or medium size houses, but also credit operations, sites and services, as well as upgrading. A much larger share of demand is met through the informal sector, which traditionallyhas produced some four or five times more shelter solutions, including credit and self help construction. Nevertheless, all of these efforts combined would at best cover only a small portion of the housing deficit. Moreover, much of the informal shelter output constitutesvery substandardhousing. InstitutionalFramework and Key Sector Issues 8.04 The principal public sector institutionsinvolved in the housing sector for middle to very low income population, are the National Housing Bank (BANVI) and the National Committee for Reconstruction (CRN). BANVI was established in the early 1970s to undertake housing construction programs to meet the needs of low income population in both the rural and urban areas. BANVI operates both as a financier and administratorof housing projects, although it is now attempting to move away from this latter function. CRN was set up following the 1976 earthquake to coordinate the national reconstructioneffort and rebuild housing destroyed - 75 - by the quake. The main focus of its existing programs is onipoverty alleviation and the promotion of community development and small infrastructureworks in urban and rural areas. As a result of its earthquake reconstructionworks it has acquired considerable expertise in low cost shelter development. In 1986 it established a new Human Settlements and Housing Division (DAHVI) to work specificallywith urban slum areas, including responsibilityfor implementationof the housing rehabilitationcomponent of the IBRD financed Municipal Development Project, w.'hichis expected to begin implementationduring 1989. 8.05 Two other public sector institutionsinvolved in the housing sector are BANDESA, the Agriculture Bank, which provides some credit in the rural sector for housing, although the bulk of its lending is for agriculture and other productive purposes, and the Instituto de Fomento de Hipotecas Aseguradas, which operates mainly as a mortgage insurance agent for upper middle to upper income families. With respect to private sector involvement in the housing sector, most institutions,including private commercial banks aad the Guatemalan Chamber of Construction,cater to the needs of the upper middle and upper class. Private sector efforts to meet housing needs of low income families are mainly carried out by NGOs. In addition, the Federacion Nacional de Cooperativasde la Vivienda provtdes home improvementcredits, mainly to targeted low income groups. 8.06 Efforts to tackle Guatemala's serious housing shortage confront obstacles from both the demand and supply sides. With respect to demand, real income levels are so low that needs are not easily translated into demand since this would require either very low cost housing solutions and/or greater emphasis on housing rehabilitationrather than new construction. From the supply side, housing solutions are limited by i) insufficientsources of financing, including the limited availabilityof public sector investment funding, and the absence of adequate financing mechanisms to attract and provide funding through the banking system, particularly for low income housing; ii) the very limited number of housing development projects directed towards low income families, reflecting the traditional orientation of private contractors and traditional financing institutionstowards high cost housing for the middle and upper class; iii) insufficientattention to, and utilization of, lower cost housing technology; and iv) slow execution of ongoing public sector housing projects. Public Expenditures in Housing and Urban Development 8.07 The 1988 Central Government budget allocated Q60.2 million or 2 percent of the budget to Housing and Urban Development. Of this amount, about 77 percent, or Q46.3 million, was allocated for investment,with the remaining amount financing current expendituresand operations of the Ministry of Urban and Rural Development and transfers to municipalities for operations and general administration. Total investment expenditureswere divided between basic housing (51.2 percent), access roads (26.2 percent), and markets and slaughterhouses (22.6 percent). Almost 70 percent of investment planned for the sector was to be financed with extetnal resources. Since only a little over half of the public monies budgeted for - 76 - housing and urban development investmentare allocated to housing, public funding of the housing sector remains extremely limited. Moreover, of this amount, about two thirds was expected to be financed from external resources,mainly from lDB. BANVI's 1988 Expenditure Program 8.08 As indicated in Table 8.1 below, BANVI's programmed expenditures in housing have almost doubled between 1987 and 1988. For 1988 BANVI budgeted Q100.2 million, of which Q24.1 million (24 percent) was allocated for direct investmentand Q34.7 million (35 percent) for financial assistance,with the remaining Q41.4 million (40 percent) budgeted for administration,including salaries, pensions, and debt service. To finance this budget, BANVI had to rely heavily on exterrnalresources, mainly disbursementof an ongoing IDB loan, as well as income generated by BANVI from housing bonds, guarantee bonds for housing mortgages, repayments on loans, deposits, and revenue from commissions for administrationof various trust funds. Direct investmentby BANVI consists entirely of an IDB financed sites and services project aimed at providing 12,500 housing solutions over a four to five year period. The project also provides for the purchase of land, technical assistance for demand and feasibility studies and institutionalstrengthening, and a very small squatter upgrading component. For 1988 the program aimed at providing about 4,000 sites during the last quarter of the year, for which the budget included Q8.4 million in counterpart funds and Q15.7 million in IDB disbursements. With respect to BANVI's financial assistance programs, BANVI operates 15 different credit lines grouped into twc areas, namely development and banking. Development credit is directed to low income households and is projected in the budget to utilize a little under half of BANVI's total credit budget. The rest of BANVI's credit program is oriented towards middle income households. Table 8.1 BANVI Expenditures - 1986-88 (QMillion) Category 1986 1987 1988 (actual) ([rogrammed) (approved) Administration 8.2 8.0 14.3 Current Transfers 0.4 3.5 13.6 Indirect Investment 5.3 7.6 24.1 Financial Assistance 18.4 13.2 34.7 Debt Service 20.9 15.7 13.5 TOTAL 53.2 48.0 100.2 Source: Ministry of Finance, 1988 budget - 77 - National Reconstruction Committee (CRN) Investment Budget for 1988 8.09 CRN's 1988 budget allocated Q9.7 million for direct investment,of which Ql.5 million was budgeted specificallyfor housing as part of the CRN component of the IBRD financed Municipal Development P,oject. However, since the IBRD loan still remains to be signed pending approval by the Guatemalan Congress, budgeted funds could not be used during 1988. The remaining Q8.2 million was allocated in support of CRN's other community development activities and emergency programs, which include a minimal amount of funding for basic housing. Housing Sector Needs and Revised Policy Framework 8.10 Taking into account the magnitude of the country's housing shortage and the limitations on public sector investment resources, the Government is in the process of reformulatingand reorienting its involvement in the sector with the objective of i) expanding the coverage or utilization of existing resources by moving away from the provision of complete (and more costly) housing units towards greater emphasis on housing rehabilitation,including self help programs; ii) encouraging greater private sector involvement in financingmiddle income housing needs, thus moving away from the private sector's current emphasis on meeting only the requirementsof the top 4 to 5 percent of the population; iii) increasing the availabilityof resources for housing through the establishment of a public lottery for housing; iv) supporting the reorientationof BANVI's activities to focus more on meeting lower income housing needs and less on middle class needs, while also moving BANVI away from its role as an administratorof housing projects to focus mainly on financing and promoting housing development;and v) encouraging broader community participation in tackling housing issues, including greater use of NGOs. At the same time the Government'soverall approach to the sector is moving away from a more narrow focus on simply the delivery of housing units to a recognition that a more comprehensive approach is needed that would focus on increasing employment opportunities. B. Urban Development Sector Overview 8.11 Guatemala's urban population constitutes about 40 percent of the country's 8.4 million inhabitants,of which Guatemala City, with 1.4 million people, accounts for about one-half. The remaining urban population resides in 326 municipalities,the bulk of which (300 municipalities)have populations of less than 20,000. Guatemala City is 20 times larger than either of the two largest secondary cities of Esculntla, the center of the large southern industrializedcotton and sugar plantation region, and Quezaltenango,the center of the populous western highlands area, both of which have populations of less than 75,000. The existing 1957 Municipal Code, currently under revision, requires municipalities to provide essential services such as water supply, sewerage, and markets, while also giving them discretionarypowers to provide transportation, - 78 - electricity, and coimmunityfacilities either directly or through concessions. Nevertheless,serious financial and technical constraints have severely limited the ability of most municipalities to provide such services. Sector Organization 8.12 One of the principal objectives of the present Government under the new Constitution is to pursue decentralizationand regionalizationof public services,while also strengtheningthe role and effectivenessof local Governments. As part of this effort, the Government has established local and regional Development Councils, coordinated by a National Development Council, with the objective of providing local communitieswith greater participation in determining their own local development priorities. These Cr-ncils are in the process of organizing themselves and preparing their initial work programs. 8.13 The principal Government institution supporting municipal development is the Municipal Development Institute (INFOM), which is responsible for providing technical and financial assistance to the 326 municipalitiesoutside of Guatemala City. INFOM prepares town plans, carries out project feasibility studies and provides low interest financing for water supply, sewerage,markets, street paving and other urlan wurks. Investment in urban facilities in Guatemala City itself, is cariled out mainly by the Municipality of Guatemala Lity, together with EMPAGUA, the semi-autonomouscompany responsible for water supply. Municipal Finance Issues 8.14 The new constitutional.locates 8 percent of ordinary revenues directly to the municipalities for investments in infrastructureand public services which improve the quality of life. These revenues are to be divided among all 327 municipalitiesbased on a formula that takes into account their size and needs. For 1988, the total allocation is estimated at Q123 million. While the total amount of resources per coimunity may only reach some Q50,000 to Q60,000 for small municipalities, even such a small sum is 15 to 20 times greater than the amount of resources previously available to such communities for capital investment. As a consequence, these transfers have provided many municipalities,particularly the smaller ones, with their first real opportunity to improve municipal facilities. Nevertheless, although many municipalitieshave been able to utilize a substantialportion of the monies allocated to date to carry out relatively straightforwardprojects, such as street paving and constructionof municipal buildings, utilizationof the funds in the future is expected to slow dGwn, given the need for more complex project preparation and that fact that most municipalities lack adequate technical capacity in project preparation and design. This underscores the need for providing the municipalitieswith technical assistance aimed at strengtheningtheir project preparation and implementationcapacity. INFOM's Investment and Expenditure Program 8.15 INFOM's municipal support activities include five operatfonal programs, namely: i) support for administrativeand financial streng:hening of municipalities through provision of training in financial management and - 79 - municipal administrationand direct INFOM technical staff assistance to the municipalities in budgeting, contractingand other financial administration; ii) technical assistance in the maintenance and operation of public services, especially water supply and sewerage systems; iii) assistance in preparing investment projects, including preparation by INFOM of feasibility studies; iv) financial assistance to municipalities through credits and direct transfers or subsidies for implementationof investment projects to improve municipal services; and v) supervisionof investment projects, particularlythose projects financed under on-going IDB funded programs. As indicated in Table 8.2 below, which summarizes expendituresby category for the period 1986 to 1988, the bulk of INFOM's budget is concentrated in its financial assistance program (52 percent of the 1988 INFOM budget), which is funded almost entirely by resources from two ongoing IDB financed projects (see below). Other expenditure categories include indirect investment (13 percent of the 1988 budget) which constitutes the share of certain tax revenues (such as the property tax and taxes on coffee, beer and gasoline) which by law are transferred to the municipalities through INFOM and are mainly used to provide counterpart furndsfor investment purposes; current transfers (15 percent of the 1988 budget) which are public funds transferred to the municipalitiesthrough INFOM to support.investment activities; INFOM's own administrativebudget (19 percent of the 1988 budget); and a small category called operations under which INFOM handles the purchase and sale of chemicals and other materials for the maintenance and operation of municipal water supply facilities. Table 8.2 INFOM - Budgeted Expenditures (1986-88) (Q Millions) Category 1986 1987 1958 (actual) (programmed) (estimated) Operations 5.3 4.7 11.8 Current transfers 6.0 6.8 6.4 Investment 8.2 16.0 5.4 Commercial Operations 0.1 0.2 0.2 Financial Assistance 10.8 14,7 17.4 Debt Service 0.5 0.6 0.4 TOTAL 30.9 43.0 41.6 Source: INFOM and World Bank estimates 8.16 INFOM's municipal development activities are currently concentratedon implementationof two IDB financed projects, nEnely a Water Supply and Sanitation Project for Secondary Cities (approvedDecember 1981) which finances 14 water supply and 3 sewerage systems in 15 smaller cities; and a Municipal Development Project (approvedMay 1983) which includes a variety of small scale investments in markets, community centers, slaughterhouses,trash disposal, and paving of urban streets. Implementationof both projects has suffered considerabledelays reflecting problems in the preparation and contracting of subprojects. However, the - 80 - water supply project is currently in an advanced state of implementation with the bulk of planned investments completed bv late 1988. Implementationof additional water supply works utilizing previously uncommitted funds will extend project implementationthrough 1990. Implementationof the municipal development project has also accelerated in recent months and is expected to be completed by end 1989. 8.17 The scope of INFOM's activities in the next three to four years will depend heavily on its ability to obtain additional external financing to continue both its municipal development and water supply and sanitation development programs. Preparation of follow up water supply and sewerage and municipal development projects are currently underway with IDB support, with the objective of completing negotiation of new loans with IDB by the end of 1989. INFOM is expected to seek additional financing of over US$100 million for both projects. The additional IDB support could be complementedwith IBRD funding of a second municipal developmen. project with the principal objective of strengtheningthe capacity of smaller municipalitiesto prepare and implement economic and social development programs and projects while also increasing resource mobilization at the municipal level. Both the proposed IDB and 1BRD projects are being designed within the context of a broader municipal development program which is being developed with the support and c'ose coordinationof both institutions. INFOM is also expecting to receive additional Government resources in the form of a Q 15 million trust fund of which 50 percent would be grant and 50 percent in the form of a long term loan to the institution. Estimates of INFOM's municipal development activities for the period through 1991 are provided in Table 8.3. They indicate substantial growth in INFOM's financial assistance activities assuming that additional income from the Q15 million trust fund becomes available in 1988 and 1989 as planned, and that new funding from IDB becomes available in 1990 and 1991. Table 8.3 INFOM - Estimated Expenditures 1988-1991 (Q Million) Category 1988 1989 1990 1991 Estimated Projected Administrative 11.8 11.6 12.0 12.5 Current Transfers 6.4 4.6 4.7 4.7 Indirect Investment 5.4 3.9 2.3 2.9 Financial Assistance 17.4 30.4 22.8 57.1 Commercial Operations 0.2 0.3 0.3 0.3 Debt Service 0.4 0.3 0.3 0.3 TOTAL 41.6 51.1 42.4 77.8 Source: INFOM and World Bank estimates - 81 - Municipal Investments in Guatemala City 8.18 As shown in tne financial projections summarized below in Table 8.4, Guatemala City's principal investment project in the coming years is the World Bank financed Municipal Development Project, of which the municipal development component totals US$15.3 million or Q 38.5 million. This project includes updating of the cadastre for the Municipality of Guatemala; technical assistance to strengthen municipal administrationand financial management; and road maintenance and improvement covering 186 kms in the principal transportationcorridors and the central business district. In addition, IDB is considering financing of a program to develop small municipal markets. The other major municipal investments will be carried out by the Water StupplyAgency, EMPAGUA. These investments are reviewed in more detail in Chapter VI on Water Supply. Table 8.4 Municipalityof Guatemala-ProjectedExpenditures (Q Million) 1988 1989 1990 1991 Recurrent Expenditures 33.7 35.9 38.3 40.8 Personnel costs 19.2 20.2 21.3 22.5 Other current Exp. 4.9 5.3 5.8 6.3 Supplies and services 2.8 3.1 3.4 3.7 Transfers o.8 7.3 7.8 8.3 Capital Outlays 15.6 21.6 22.9 24.2 of which Municipal Develop. Proj. 3.7 8.2 7.9 7.4 Debt Service 1.7 1.6 1.6 1.0 TOTAL 51.0 59.1 62.8 66.0 Source: Municipality of Guatemala and World Bank estimates Combined Investment Program for Housing and Urban Development 8.19 As summarized in Table 8.5 below, the planned investment program for housing and urban development for the period 1988-1991 totals Q 1028.s million, of which Q405.9 million (40 percent) is for housing and the remainder Q672.6 million for municipal development,including investments expected to to be financed out of the 8 percent allocation. The bulk of public sector resources devoted to the sector, over and above dhe 8 percent, are utilized through on lending by BANVI for housing and lending by INFOM to municipalities for municipal works. - 82 - Table 8.5 Housing and Urban Development Investment Program 1988-91 'Q Million) Institution 1988 1989 1990 1991 Totals Estimated - Programmed------ CRN 4.0 14.6 15.8 13.8 48.2 BANVI 37.1 86. 133.2 109.1 365.7 INFOM 12.0 22.9 10.3 17.1 65.1 Ministry of Public 10.7 14.6 7.0 4.0 36.3 Works Municipality of 15.6 21.6 22.9 24.2 84.3 Guatemala Transfer to Municipalities (8Z) 78.1 96.9 115.2 138.7 428.9 TOTALS 157.5 256.9 304.4 306.9 1028.5 Sovrce: StatisticalAppendix, lable 2.8 Conclusions and Principal Recommendations 8.20 As in other sectors, Ehe Gover-ment'sability to accelerate investment in housing and municipal works and services will depend heavily on its success in encouraging institutionalreforms and finding new vehicles for mobilizing additional resources, including continuing with its efforts to encourage stronger community participation in the planning and financing of developmentprojects. In this regard, the Government expects that the proposed Social lnvestment Fund would be able to make a major contribution in helping meet basic sector needs. Key issues for housing and municipal development are highlighted below. Housing 8.21 Efforts to resolve Guatemala's serious lack of adequate housing requires a multifaceted approach which will increase private sector involvement,rationalize BANVI's operations, facilitate more rapid resolution of land ownership issues, and reinforce municipal involvement in the planning and organization of shelter developmentwithin the context of a coordinated approach to providing adequate urban services. There are three key areas where continued progress is essential. a. A first priority is to expand private sector participation in the financing and development of housing. At present private financing of housing covers only the very upper end of housing demand, thus meeting the needs of only 3 to 4 percent of the population. This should be expanded to cover the bulk of middle income housing needs, mainly though development of a national system for housing finance, including the necessary financial instruments needed to mobilize long term funds. - 83 - b. A second priority is continuing the restructuringof BANVI with the objective of i) refocusing its activities to concentrate on lower income housing; ii) restoring its financial health both through improving its operations and financial management, including its policies on arrears, and strengtlheningits resource base; iii) moving away from the direct development and management of housing projects, while developing its role as a promoter and coordinator of housing development;and iv) strengtheningBANVI's capacity to analyze housing sector demand and better plan development of the sector. c. A third priority is the need to develop new approaches for meeting the needs of the urban poor, including a stronger focus on self- help, housing rehabilitationand sites and services rather than the provision of more costly complete housing solutions; and the development of cost recovery mechanisms which can function despite very low income levels. In this con4ext, implementationof the pilot program in squatter upgrading included in the on-going Municipal Development Project, is designed to demonstrate new approaches to providing basic services and secure tenure at costs which can be recovered on an affordable basis from the communities involved, the vast majority of which have incomes well below the 25th percentile. Municipal Devolopment 8.22 Prospects for acceleratingmunicipal development in Guatemala have improved substantiallyas a result of the Government'sdecentralization efforts and the provision of increased resources to the municipalities through the 8 percent allocation. The speed and efficiency of the effort to expand municipal services and facilities,however, will depend largely on the ability of local Government to improve its planning and programming, its financial management, and its capacity to design and manage investment. In reality, with the exception of the larger secondary cities, local Government human resources are extremely limited. As such, rapid improvementof local Government capacity is not feasible. What is important is that a serious effort be initiated to provide technical assistance and training to municipalities. At the same time, ongoing efforts to strengther,INFOM should be continued to enable it to play a larger role in supporting institutionaldevelopment at the local level. Within this context, the following actions and programs should be considered. a. In the short term, urgent actions are needed to provide municipalitieswith direct technical assistance in designing development programs and projects and initiating execution of municipal developmentworks. This will require increased involvement of INFOM as well as efforts to mobilize NGOs and other community groups, while also providing the municipalitieswith funding to finance project design work utilizing NGOs and private sector consulting firms. A portion of these needs are expected to be addressed within the framework of the proposed Social Investment Fund. - 84 - b. Over the medium term, Government should develop specific technical assistance and training programs to strengthen municipal management, with particular emphasis on grass roots programs that work directly at the local level. Further efforts to provide the municipalitieswith access to additional financing and broaden their revenue base will also be needed. c. INFOM, as the only major public sector entity with direct and indepth experience with municipalities,should play a major role in improving municipal management. To do so, its own work programs need to be refocused to give more attention to training and technical assistance, and less emphasis to direct involvement in project execution. At the same time, in keeping with decentralizationefforts, INFOM's regional offices could be strengthenedto enable them to provide more effective technical assistance to municipalities. d. INFOM's ability to increase its role in municipal developmentwill depend in great part on its ability to develop permanent sources of funding, so as to reduce its heavy dependence on transfers and external borrowing. - 85 - CHAPTER IX: STRENGTHENING PLANNING, PROJECT PREPARATION, AND PROJECT EXECUTION Introduction 9.01 As indicated in Chapter I, Guatemala's public sector investment effort has declined sharply in recent years, averaging only about 2.6 percent of GDP since 1983. This low level of investment results in part from the country's limited resource mobilization efforts. However, it also reflects an inadequate planning and project preparation effort, as well as serious delays in project execution. The insufficient attention paid to planning and project preparation has greatly increased the risk of spending scarce resources on lower priority projects, while also having the effect of giving external agencies a more important role than may be warranted in determining whichlprojects to finance. Slow project execution has not only undermined Guatemala's ability to reach its development objectives, but also greatly increased project costs, both in terms of the delays in obtaining the benefits from the investment effort as well as in higher costs from price increases and higher commitment and other charges on exLernal loans. At the same time, the constraints on planning and project execution have also undermined the country's image abroad and made it more difficult to attract additional external support. 9.02 Guatemala needs to strengthen its planning, project preparation and project execution capacity if it is to achieve its medium term development objectives. This chapter examines the strengths and weaknesses of the Government's planning, preparation and project execution effort, and makes specific recommendations on how they can he imp8oved. Planning and Programming of Investments 9.03 Guatemala's institutional framework for planning and programming of investments consists primarily of a national planning secretariat (SEGEPLAN) together with planning units in most ministries and decentralized agencies. In addition, the Government is in the process of establishing a system of Urban and Rural Development CouILcilsas called for under the 1985 Constitution to provide greater local and regional input into the development planning process and better ensure that local priorities are taken into account. These councJls are being established at the municipal, departmental, regional and national levels. The first two councils will seek to identify the aspirations and needs of the local population while the other two will have responsibility for the formulati(n of a national and regional development policies. Overall coordination is to be provided by the National Council, with SEGEPLAN serving as the technical secretariat to the National Council, and providing technical support to the other councils, thus giving SEGEPLAN an important role in the decentralized planning process. The Government is also in the process of creating coordinating bodies or councils for priority projects and programs in the areas of water and itrigation, land distribution, roads, food security, housing, export promotion, health, education, and public security, with the objective of accelerating investment in these priority areas. To date only the export promotion, water, irrigation, and land distribution bodies have been established. - 86 - 9.04 SEGEPLAN's role has been marginal in recent years, owing in part to the tim- needed to establish and organize the new planning framework, the lack of a clear definition of how it is to function, and the creation of several other entities whlichare also involved in developmentplanning, such as the Technical Secretariat in the Vice President's office and the Ministry of Urban and Rural Development. It has therefore been unable to provide sufficient guidance in investment programming and setting of priorities, or ensure adequate coordinationbetween sectors. As a result, investment programming has become largely an ad hoc process determined mainly by the individualagencies, depending in part on their political clout, and the decisions on budget allocationsmade by the Budget Office in the Ministry of Finance, often without sufficient informationor guidance in respect to sectoral and national priorities. Recognizing the importance of a stronger planning and coordinatirg function, the Government has recently moved to strengthenSEGEPLAN's capacity to program investments through changes in its institutional structure. Under the new structure, SEGIPLAN is divided into two sub secretariats,one for international cooperation and one for regional and national planning. In addition, the recently appointed Secretary General of SEGEPLAN has stressed the importance of strengtheningSEGEPLAN's role in coordinatingdevelopment efforts, while also improving the availabilityof informationand statistics so as to have a better basis for determining priorities and evaluating results. Experience in other countries has shown that planning agencies are most effective when they concentrate on i) establishing national, regional, and sectoral priorities; ii) assisting in the review and evaluation of programs and projects consistentwith agreed priorities; and iii) reviewing progress in the implementationof projects and in the achievement of national objectives and medium term goals. In order to provide the guidance and support needed for a more effective planning process, both at the national and regional levels, SEGEPLAN will need considerableetrengthening in the areas of planning and investment programming as well as in project evaluation and monitoring. 9.05 During the past few years, SEGEPLAN has preppred a number of sectoral development strategies and proposed investmentprograms in response to the Government'spriorities as set forth in the "Program of National Reorganization"anl more recently in the Government's "Guatemala 2000 Program." However, its sectoral policy recommendationsare quite general and the investmentprogram consists mainly of a list of proposed projects, many only in the idea stage. As such the estimated costs of the investmentsproposed are likely to understate the actual cost. Moreover, the SEGEPLAN programs do not provide any analysis of projected resource availability or offer any ranking or analysis of sector priorities. Consequently, the country does not have an agreed public investment program which clearly takes into account sectoral and national prioritieswithin an overall macro economic and fiscal context. Such a program is clearly needed to determine the desirable level and composition of public spending as well as its sources of finance. 9.06 Recommendation. If SEGEPLAN is to play a more effective role in helping Guatemala's policy makers take key decisions on investment priorities and the allocation of public -esources,it must become more directly involved in translating broad development objectives into specific guidelines for spending and project preparation. The overall objective - 87 - should be to influence the design of public sector programs and projects rather than simply reacting to programs or projects submitted for approval. This will require changes in the way SEGEPLAN is organized and managed as well as changes in the mix of skills reouired. As a first step in beginning to better link public spending with key development objectives, SEGEPLAN may wish to concentrate on the following tasks: i) reviewing the wealth of sectoral information already available and establishingthe three or four highest priority policy and spending needs for each key sector; ii) analyzing the existing budget and investment program to see how well these priorities are covered; iii) identifying a limited number of major policy and expenditure adjustments for each sector; and iv) recommendinghow these chcl:gescan be initiated, starting with the guidelines being prepared for the 1990 budget year. 9.07 Since on-going efforts to restructure and strengthen SEGEPLAN may take some time, it is recommended initially that a small working group of economists and sectoral experts from SEGEPLAN and other entities be established to carry out the above tasks, including putting together specific guidelines for preparing the 1990 budget; identifying the specific programs and/or projects which either need to be adjusted or newly prepared to achieve the Government'sobjectives, and preparing a public investment program and overall spending guidelines for the next three years consistent with the expected availabilityof resources and the macro-economic framework. The group would need to work closely with the Bank of Guatemala, the Ministry of Economy, and the Ministry of Finance to ensure a sound macro framework for such a program. Project Preparation 9.08 Deficient project preparation is one of the most important bottlenecks slowing Government development efforts. There are two main aspects to the problem. First, there are simply not enough projects being prepared since the Government'sproject preparation capacity and funding for preparation work is very limited. In fact, the only substantive preparation work is being carried out with the active support of external donors, thus giving external agencies a major role in determining investment priorities. Second, many of the projects have been only partially or inadequatelyprepared, particularly in respect to implementationand procedural arrangements,thus opening the way for serious delays during execution. The fact that many of the projects have been and continue to be prepared with the active support of external agencies, does not necessarily guarantee adequate project preparation given differing levels of analysis, the pressure of often accelerated timetables, and the fact that external agencies may not have a complete understanding of the complexitiesof working in certain sectors. There is therefore a clear need to develop the Government'sown capacity to prepare projects, including adequate and timely funding of preparation activities, as well as strengthen the Government'sability to coordinate and monitor project preparation and ensure that preparation efforts are consistentwith overall sector and national priorities. 9.09 In order to improve project preparation capacity, the Government is in the process of establishinga National System for Financing Pre- investment (SINAFIP)which is expected to be financed initiallywith funds from IDB, the Venezuelan Fund, and the Federal Republic of Germany. This - 88 - system has been under discussion for manv years, but is now expected to become operational in the near future. The pre-investmentfund would operate through trust funds (fideicomisos)established in public and private banks, which would in turn finance feasibility studies in accordance with agreed criteria. The trust funds would be managed by the Ministry of Finance, however overall responsibilityfor the SINAFIP system would rest with an AdministrativeCouncil, with an executive and technical secretariat created in SEGEPLAN. As currently designed the system for managing the pre-investmentfund appears overly complex, especially the involvement of the Ministry of Finance, which may no longer be needed since the funds will not be handled through the national budget as initially proposed. In addition, the prccedures for approving requests foi use of the funds for specific pre-investmentwork appear to be unduly complicated. 9.10 Recommendation. Given the importance of a well functioningpre- investment system, it is strongly recommendedthat the Government review the proposed organizationa'larrangements for SINAFIP and clarify and simplify procedures for the operation of the system. More specifically, consideration should be given to: i) eliminating the direct involvementof the Ministry of Finance in managing the trust funds, since its participation in the AdministrativeCouncil should be sufficient to ensure th.-tits interests are taken into account; ii) providing SINAFIP with legal personality thus enabling it to sign contracts directly as may be appropriate; iii) considering an appropriatemechanism for supporting project preparation efforts at the local or regional level; iv) minimizing SINAFIP's dependence on budgetary appropriationsand external resources by providing it with its own capital or other permanent source of funds; v) improving the management of the project preparation fund by better defining the functioning of the trust funds while ensuring that all administrative work is carried out by the trust fund concerned, determining th; criteria for allocating grant funds, and spelling out SEGEPLAN's role in providing guidance on terms of reference, evaluating costs and reviewing the results and recommendationsof completed studies. In summary, care should be taken that STNAFIP does not become a relatively large bureaucracy,which duplicates in part functions performed by SEGEPLAN, while also ensuring that the process of contracting and supervisingpre-feasibility and other work remains as agile as possible so as to avoid undue delays in the initiation and implementationof investment preparation activities. 9.11 Since actual startup of the project preparation facility may still take some time, SEGEPLAN should not wait for its establishmentto begin strengtheningproject preparation. One step that SEGEPLAN could take very quickly is to i) analyze the status of existing project preparation;ii) identify on-going preparationwork that should be stopped or accelerated or modified in light of changing priorities; and iii) identify those sectors and areas where project preparation is the weakest and explore alternative means to accelerate project preparation. Project Execution 9.12 Poor or slow project execution remains the third major constraint on public sector investment. Although problems in the execution of - 89 - individual projects vary depending on the the nature of the project and its complexity, there are a number of key constraintswhich tend to affect a large number of the projects in execution. These constraints are outlined below. a. Perhaps the most important underlyingproblem is a lack of effective project administrationcombined with insufficientback up and support from higher level management. This results in large part from inadequatelytrained administratorsand technicianswithout the experience and skills needed to manage bidding and contracting,coordinate the work of internationaland national consultants,and monitor project execution. At the same time, the executing units are often created without sufficient power and authouritytaking into account the importance of t'he project and without having the needed access to senior management and the legal and oLher authority needed to direct large projects requiring internationalbidding. Without sufficient high level support and establishmentof investment expenditure targets and priorities, project execution is subjected to the often indifferentbureaucracies of the Ministries concerned as well as to the delays of other entities, such as the Contraloria,which are not responsiblefor the project and have no interest in expediting project execution. b. Project execution is also seriously affected by the way the public procurement law is interpreted. Contract awards may take more than one year partly because of endless procedures (trainites)as civil servants try to avoid taking full responsibilityor because, as often seems to be the case, the provisions of the law are simply ignored. A recent experiment by the Technical Secretariat of the Vice Presidency demonstratedthat a contract could be awarded--followingexisting law--in two months. A revised procurement law has been drafted which corrects some flaws in the present legislation such as low bidding thresholds and complex internationalbidding rules. c. Further delays result from the complexity of the procedures applied for the disbursementof budget funds. Although payment or purchase orders are no longer reviewed by both the Budget Office and Controllsrs (only by Controllers),a significantamount of time (over 70 percent) is spent in reviewing payment or purchase requests of less than Q 1000 (US$370), even though such payments could be handled more expeditiouslyby the executing agencies themselves by making use of petty cash funds (Caja Chica). d. Poor administrativearrangements also result in part from insufficientproject preparation. In many cases. the pre- feasibility study or othierproject design work does not define in sufficient detail the objectives of the project or establish clear parameters for bidding and other key elements. At the same time, the preparatorywork may not provide sufficient analysis of project administrativearrangements to ensure that an adequate project management framework is put in place. There is also a tendency on the part of most external lenders and donors to establish separate project implementationunits for each project. - 90 - While this is und,erstandablegiven the weak management capacity of existing ministries and agencies, it nevertheless tends to increase problems of poor coordinationand often fails to address adequately the need for overall strengtheningof public sector management capacity. e. A further difficulty affecting the speed of project execution stems from delays in complying with project conditionality required by external financing agencies. This results in part from the failure of Government and the external agencies invol.ved to realisticallyassess the timing and feasibilityof certain requirementsand ensure that the project is designed in a way that minimizes the potential for delays in meeting key conditionalitv. f. Another constraint reflects the lack of coordination between the Government entities involved in the negotiation of loans and preparation and execution of projects and well as the slow and extremely bureaucraticprocesses utilized in carrying out bidding and contracting. As a consequence the project often fails to receive the budgetary support and legal and other required approvals in a timely fashion. 9.13 Recognizing the need to strengthen project implementation,the Ministry of Finance is in the process of introducing a number of actions to speed up the use of external resources and thereby improve overall project execution. First, it is establishinga new project monitoring system in the Directorate of External Finance, including the development of a project information system and the establishmentof Management Committees (ComisionesGerenciales) for major projects facing problems in implementationand the use of external financing, with the objective of more effectively coordinatingproject execution and resolving key issues. Each Management Committee would include representativesof the External Finance Department and the Budget Office, the executing agency, and the financing agency concerned. Second, the Ministry is proposing the reestablishmentof the Commission for External Financing (COFE) as the body responsible for determining external financing policy and approving the negotiation of new loans. This Commission includes the Minister of Finance, the President of the Bank of Guatemala, the Secretary General of SEGEPLAN, the head of the Directorate of External rinance, and the Director of the Technical Directorate for the Budget. 9.14 In order to formalize these initiativesand provide a stronger framework for the administrationof external financial resources, the Ministry of Finance is also preparing a draft law for submission to the Congress. This law would establish a clear policy framework for external financing, reactivate the Commission for External Financing, clarify the functions of the Directorate of External Finance as the main entity responsible for coordinating external assistance, provide fcr the establishment of technical working groups for each project or loan under negotiation, and establish the Management Committees to resolve project implementationissues and monitor project execution. 9.15 In addition to the above, the Directorate of External Finance in the Ministry of Finance is also undertaking a number of other steps to improve monitoring of projects in execution. Technical assistance is being - 91 - provided through UNDP to assist the Directorate in reviewing its organization and improving the administrationof external resources. As part of this effort the Directorate has prepared a plan of action aimed to at expediting public sector investmentduring 1989, including the identificationof the highest priority projects in each sector and the establishment of a high level management review process designed to ensure that the selected priority projects have all of the financial,managerial, and other support required to ensure their rapid implementation. 9.16 Recommendations. The most important action required to improve project execution -s to ensure the appointment of experienced and well trained project managers and to provide project managers with the high level support needed to effectively manage a major investment project. Each development project must be given the priority it deserves and senior management in individual Ministries or decentra]ized entities should monitor progress on a routine basis. At the same time, to ensure that the project manager can operate effectively it is essential that: i) the administrativeframework and the operational requirementsand details needed to facilitate project implementationare carefully worked out during preparation of the project; ii) project requirementsand conditionalityare carefully defined during negotiationsto ensure that they are realistic; iii) adequate mechanisms for improving coordinationwithin the Government are established to ensure adequate monitoring of project execution and the rapid resolution of project implementationissues; iv) steps are taken to minimize the number of internal approvals required for each execution step; and v) actions are taken to simplify and make more agile the systems of procurement and processing of purchase orders. Ministry of Finance initiatives to improve the management of external financial resources should be continued and further strengthened,including processing of the proposed law on external financialmanagement, which should be expedited. - 92 - CHAPTERX. OVERALLCONCLUSIONS AND RECOMMENDATIONS 10.01 Guatemala confronts two basic public expenditure issues. First, the ',overnmentneeds to improve the efficiency with which it utilizes already available resources. This is by far the highest priority and requires not only improvementsin the execution of projects and programs, but also adjustments in the allocation of public resources. Second, the Government must find ways to increase the resources available to it for meeting urgent development and investment priorities. This requires not only an additional public sector resource mobilization effort, but also further actions to encourage greater community and private sector involvement in the planning and financing of developmentneeds. The tasks of improving the allocation of public expendituresand increasing the efficiency of resource use are not easy ones and require a concerted effort on several fronts at the same time. As indicated in the previous chapters, the Government has started to tackle some of these issues, but a more systematic effort is required if satisfactoryprogress is to be made in achieving the country's twin goals of promoting sustained economic recovery and redressing social inequities. An outline of key issues and suggested agenda for action is presented below. Improving the Allocation of Public Expenditures 10.02 Within the existing public expenditure framework, there are two major allocation issues. One is the overly high share allocated to wages and salaries which is symptomatic of serious overstaffingproblems and low public sector productivity. Resolving this issue will require a sustained effort to restructurekey institutions,improve public management and other skills, while also providing incentives to facilitate transfers to the private sector. 10.03 The other major resource allocation issue is the inadequate share of public resources allocated to the social sectors and certain basic services. Additional resources need to be allocated to those activities with large external benefits to society and in which private sector investment would always be limited. Primary education, preventive and primary health care, water supply and sewerage, and low income housing are all activities that qualify under this criteria. In addition, the Government should help increase the productivityand earnings of small farmers, who constitute the majority of the poor, through the increased provision of extension services, basic infrastructuresuch as feeder roads and access to credit. Increasing public expenditures in these sectors requires both a better allocation of existing resourceswithin a sector, as weJl as in some cases shifting allocations between sectors. Thus, for example, expenditureson higher education could be shifted increasinglyto the private sector, with public financing concentratingon primary and secondary education; similarly, resources currently allocated for INDECA's operations for its relativelyminor basic grains marketing activities could better be utilized to improve financing of agriculture extension, thus also helping to increase farmer incomes. - 93 - Reshaping Investment Priorities 10.04 In addition to improving the allocation of expenditures, public sector investment priorities can be adjusted to better reflect Government objectives. Guatemala is fortunate that it has no major "white elephants" in its investmentprogram. Nevertheless, some of the older projects may no longer fully correspcnd to the currenitGovernment's priorities, and some revisions in prcject scope, if still feasible, should be carried out. At the same time, the preparation of new projects needs to be reviewed to ensure that they match current priorities and country requirements. The following actions and adjustments in the different sectors would be desirable: a) Agriculture. Investment should be targeted more directly for small farmer development,poverty alleviation and protection of natural resources. Investment in costly large scale irrigation projects should be minimized, with emphasis on encouraging private investment for irrigation of large size commercial fatms. The proposed Montufar irrigation project, for example, should be redirected towards mini-irrigationrather than utilizing public funds for financing large scale commercial irrigation,which could be financed by the private sector. Consideration should be given to reallocatingremainiing funds from the ongoing agriculture technology project towards research on the needs of the small holder, crop diversification,and export promotion, with particular emphasis on the Altiplano. Further investment in INDECA to expand its marketing facilities should be halted pending a full review of INDECA, including the rationale for and effectivenessof its market interventions. Alternative mechanismrs for improving food security should be explored, including better targeting of food aid. b) Transport. Expedite carrying out of the National Transport St,, including a review of the feasibilityof new investment in railways given its questionablecompetitive edge over road transport. Review the timing and magnitude of the proposed investment in Puerto Santo Tomas de Castilla in light of the need to strengthen port management and operations, thus rnaikingopt.imal use of existing facilities to support Guatemala's export drive. Maintain the present focus on improving rehabilitationand maintenance of Guatemala's road network, while concentratingnew construction on expansion of the rural road network. c) Water Supply. Investment priorities should include: i) extending water supply to the fringes of the capital city and major secondary cities; ii) expanding water and sanitation services in rural areas, with low cost solutions and community participation; iii) protecting water sources particularly in the Guatemala city areas through reforestationand treatment of solid wastes; and iv) providing treatment for toxic industrial wastes and domestic sewerage in areas where surface water contaminationdirectly affects community water supplies. - 94 - d) Health. Make more effective use of existing resourc3s in reaching the majority of the poor by increasing the share of expenditures allocated for primary and preventive health care as well as the share of resources allocated to the rural areas, while limiting expenditureson relatively expensive curative care in the capital city. Initiate preparation of additional projects in the health sector to strengthen a very weak project pipeline, with particular emphasis on improving rural health care and enhancing the effectivenessof preventive health care. e) Education. Continue the emphasis on expanding primary education, including expediting implementationof on-going projects and initiating preparation of additional projects in primary education to strengthen a weak project pipeline. Consider increasing tuition for higher education while ensuring access through fellowships to poor students, thus freeing resources for expanding primary education. f) Housing and Urban Development. Continue to design more cost effective means for meeting low income housing needs, including emphasis on self-help solutions, housing rehabilitationand sites and services, rather than more costly, complete housing solutions. Encourage both greater community and NGO participation in low income housing solutions,while modifying institutionsand policies in the financial sector to promote greater private sector financing of middle to high income housing. g) Municipal Development. Provide municipalitieswith direct technical assistance in designing development programs and projects to facilitate appropriate utilization of the 8 percent, including efforts to strengthen INFOM's technical assistance role while also expanding NGO efforts in municipal and community development. h) Power. Reduce planned investments to the minimal level consistent with maintaining adequate power supplies, with particular e.mphasis on reducing the high cost of studies and utilizing international competitive bidding to obtain most favorable prices. InstitutionalRestructuring 10.05 Guatemala's ability to more effectively utilize its scarce public resources for development,depends in great part on the carrying out of fundamental reforms in key public entities. Serious institutional constraints in key public enterprises and agencies impairs developmentof their respective sectors and places an additional burden on limited fiscal and human resources. Key recommendationsfor major public agencies are summarized below: a) INDE. Improving INDE's operations and financial viability is urgent given its substantial and increasing drain on public finances as well as the strategic role the power sector plays in development. RehabilitatingINDE's finances will require hard political choices, including considerationof further periodic - 95 - adjustments of power tariffs, additional financial support from the Government, and changes in INDE's institutionalstructure, including the provision of increased autcnomy in handling its staffing and financial matters. Nevertheless, strong Government support must be accompanied by an equally strong effort ur the part of INDE to increase the efficiency of its operations. To facilitate such an effort, Government suplportof INDE should be provided within the context of a specific agreement with INDE which clearly spells out the actions to be taken by INDE to rationalize its operations, the financial and other commitments to be made the Government, and specific arrangements for monitoring and enforcing compliance. In addition to improving INDE's management and finances, consideration should also be given to improving coordinationwith EEGSA, including a possible adjustment in the division of labor between the two institutions,with INDE specializingin generation and EEGSA taking over responsibility for all distribution. b) GUATEL. Although GUATEL is financially sound given previous increases in internationalrates, its domestic rates remain far too low to encourage good service and efficient use of the system. The Government should consider giving GUATEL further managerial independenceincluding enabling it to establish its own tariffs, in exchange for agreement on actions to improve the efficiency of its operations, reduce non essential personnel, and provide expanded service through increased subcontractingto the private sector. c) BANDESA. The provision of adequate agriculture credit to small and medium scale farmers is crucial to Guatemala's development effort. In this effort BANDESA should play a major role. It cannot do so without major institutionalimprovements. Ongoing efforts to modernize and reorganize BANDESA's operations,with external technical assistance, should be fully supported. At the same time, alternative vehicles for providing such credit should be explored, inclueing greater use of private sector financial institutionsand cooperatives. d) INDECA. The effectivenessof its operations in the food security area should be thoroughly reassessed and considerationgiven to alternativemechanisms to ensure the availabilityof food supplies. e) INFOM. Its role as the major provider of technical assistance and training to the municipalitiesshould be strengthened. The urgency of this effort is now greater than ever, as the municipalitiesare receiving substantial resources from the treasury (the 8 percent) which cannot be utilized in a timely and cost effective manner without major improvementsin the capacity of municipalitiesto prepare and execute projects, while also strengtheningtheir financialmanagement skills. - 96 - f) BANVI. The ongoing restructuringeffort should continue with the objective of refocusing BANVI activities on lower income housing, strengtheningits financial situation including its arrears policies, and improving its planning capabilities. g) Water Supply Institutions. Existing sector institutionsare fragmentedand weak. Although the establishment of CONAGUA will help improve sector coordination, a major reorganizationof the sector is needed if the provision of water and sanitation services are to be expanded. Proposed institutionalarrangements include: i) the creation of Central Government entities for both water resource allocation and for sector investmentplanning; ii) the consolidationof all agencies dealing with rural water supply into one entity; and iii) continuationof the current system of rural water committeeswith increased technical support. Increased Mobilization of Resources 10.06 In addition to the resource allocation issues summarized above, perhaps the most difficult and crucial development issue facing Guatemala's poli;y makers, is the question of resource mobilization. This report recommends a variety of measures for increasingthe availabilityof resources, including both increases in revenue through better tax administrationand additional tax reform, as well as through increased prices for public utilities and adjustments in user charges, coupled with institutionaland administrativeimprovements to make more effective use of existing resources. Nevertheless, satisfactoryprogress will require time and difficult political decisions. 10.07 While increased resources for investment in key sectors is essential if Guatemala is to achieve its development goals, a larger public sector does not necessarily follow. The overall goal should be to finance adequate public services in those sectors and areas where private investmentcannot effectively operate or where public interest clearly outweighs private concerns. It seems clear that in such areas as health, education, low income housing, water supply and sanitation and other municipal services, basic transport and roads, and agriculture services, especially for small to medium sized farmers, that strong public sector involvement is essential. It is much less clear in such areas as telpcommunicationsand power, for example, where private sector financing of investment is much more feasible. Although issues of privatization go well beyond this report, the Governmentmay also need to consider whether certain services could not be more cheaply and effectively supplied by the private sector, thus minimizing what needs to be financed out of the public purse. 10.08 The Government'sefforts to open up alternative development channels outside the Central Government and decentralizedpublic agencies through strengtheningthe role of the municipalitiesand working with cooperatives, NGOs and other private associationsshould also be encouraged. The proposed establishmentof a Social Invertment Fund would support the Government's efforts to develop alternativemechanisms for improving the living conditions of the poor and increasing expenditureson social programs and projects. - 97 - Accelerating Project Execution 10.09 Urgent action is also needed to accelerate the slow pace of project execution. As a first step, each agency should identify its highest priority projects, review management and funding requirements,and make changes in project management as may be appropriate to ensure that each project has the human and financial resources required, including reallocatingfunds from less essential tasks. To help senior management monitor progress, specific financial and physical targets should be established together with mechanisms for frequent monitoring. In addition to the above, the following actions are recommended: a) accelerating efforts to secure legislativeapproval of the revised procurement law, while reviewing internal processing requirements to minimize the number of internal approvals required; b) facilitating rapid resolutionof implementationproblems through better coordination, including establishmentof special Management Committees (ComisionesGerenciales) to more efficiently resolve implementationissues as proposed by the Ministry of Finance; c) further strengtheningthe management of external finance, including approval of new legislation,through reestablishmento0 the Commission for External Financing, with particular emphasis on ensuring that projects proposed for external financing are adequately prepared, especially the management requirements,and key project conditionalityis feasible and can be carried out in the timeframe proposed; and d) expediting the disbursementor utilization of project financing by encouraging the use of petty cash funds to handle small expenditures. StrengtheningPlanning and Project Preparation 10.10 The planning agency, SEGEPLAN, requires considerable strengthening in terms of training and skills as well as in the organizationand focus of its key tasks. This does not require an increase in the overall size of SEGEPLAN, but rather improved use of existing resourceswhile enabling SEGEPLAN to draw on key skills existing elsewhere in the public sector as may be needed. SEGEPLAN's primary functions are to establish investment and expenditurepriorities; oversee and coordinate the preparation of projects designed to meet these priorities,while ensuring that such projects are economically and financiallysound; and work closely with the Ministry of Finance and Banco de Guatemala to match these projects with sound financing arrangements consistent with the country's macro economic program. SEGEPLAN needs to minimize the time spent on listing and categorizingprojects based on limited data from project implementing agencies, and concentrate more on the tasks outlined above. Specific actions recommended to strengthen planning and project preparation include: - 98 - a) establishing a small working group made up of senior staff from key ministries to: i) establish the highest priority spending and policy needs in each major sector; ii) analyze the existing budget and investment program to see how well these priorities are covered; iii) ide;.tifythe principal spending and programming adjustments required, including suggested guidelines for the 1990 budget; and iv) prepare a public investment program and spending guidelines for the next three years consistent with the availability of resources and the overall macro-economizprogram. b) giving increased attention to project preparation, especially in those sectors such as healt. and education where the project pipeline is especiallyweak, including strengthening SEGEPLAN's role in coordiaatingproject preparation; identifyingproject preparation needs; and proriding additional funding through establishment of the proposed pre-investmentfund, SINAFIP, which should be put into operation as soon as possible, while at the same time reviewing proposed operational arrangements for the fund to simplify procedures and enhance its ability to operate as an effective and agile institution;and c) providing technical assistance and financial support needed to accelerate project preparation at the local level to enhance the capacity of local communities to satisfactorilyutilize their share of the 8 percent of general revenues allocated to them under the Constitution. - 99 - ANNEXES AND STATISTICALAPPENDIX ANNEXES ANNEX I: The Tax Regime ANNEX II: Macroenomic Projections ANNEX III: NGOs in Guatemala STATISTICALAPPENDIX Section I: Standard Tables Section II: Public Sector Investment Program Section III: Other Sector Tables ANNEX I - 100 - GUATEMALA THE TAX REGIME Introduction 1. Guatemala's tax system is characterizedby: (i) low tax burden; and (ii) high reliance on indirect taxes, particularlytaxes on trade. The tax burden--tax revenues over GDP--is one of the lowest in the world and is about one-half of countries with similar per capita income (Table I.1)). It declined from a peak of about 11 percent in the late 1970s, to an average of 6 percent of GDP in 1984-85. This drop resulted primarily from lower export and import taxes due to lower trade volumes and export prices; trade taxes accounted for 39 percent of tax revenues in 1979/1980 and for only 13 percent in 1985/1986 (Table I.2). More recently, lower revenues have resulted from lower taxes on domestic transactions. Domestic indirect taxes dropped with the reduction in the rate and coverage of the value added tax (VAT) introduced in 1983. With the introductionof new, temporary export taxes (which are gradually being phased out) the tax burden recovered in 1987 to 8.2 percent of GDP and trade taxes rose to 30 percent of tax revenues. 2. Tax evasion is reportedly extremely high. Although there is no hard evidence to show the degree of tax evasion, it is revealing that Guatemala's income tax rates are similar or even higher than in other countries, while income tax yields are only a small fraction of the revenues obtained in those countries (Table I.3). 3. Tax legislation and tax administrationhave been very lax. In 1986, only about two thirds of the 82,700 taxpayers filing income tax returns paid any tax. Of those who paid any taxes, deductions were extremely generous: corporationsdeclared deductions covering up 95 percent of their gross income; individuals 70 percent. Taxes actually paid represented only 1.4 percent of corporate gross income and 3.4 percent of personal gross income. As regards the VAT, fiscal credits on inputs were granted with very little control and refunds owed by the treasury to VAT taxpayers have accumulated to Q102 million (about one-third of 1987 VAT colLections). Moreover, many firms which collected VAT from customers did not turn it into the treasury. The situation with the other taxes was equally gloomy: property taxes were based on a late 1960 valuation obviously eroded by inflation; gift and inheritance taxes wert widely avoided via trusts; taxes on idle land were seldom enforced; and selective consumption taxes introduced in 1985 were suspended because the private sector argued that they constituted double taxation (with the VAT) and were therefore considered unconstitutional. T Table I.1 GUATEMALA--Revenues, by ype of Tax a/ (t of GDP) Domestic Taxes on goods and Foreign Social Woalth & CNP Trade Security Property Other per cap. Total Income Taxes Services (1981 Other Total Imports Exports Other Total Tot-l Total dollars) Total Individual Corporate Other Total VAT Excite 1.20 0.09 1.79 3.12 1.81 1.11 0.21 2.32 1.18 1.08 0.06 1,140 9.76 1.3 0.77 0.96 0.01 1.12 0.63 0.66 Guatemala b/ 4.73 1.89 1.91 0.92 6.31 4.36 0.81 0.15 1,195 c/ 18.16 6.75 2.16 3.26 0.84 2.02 0.63 0.81 Per Capita (8S5-1699) 6.46 2.14 2.20 1.11 3.96 3.03 0.76 0.17 Hemisphere 1,841 d/ 17.62 4.86 1.42 2.93 0.62 1.49 0.43 0.67 Western 0.62 4.81 2.07 1.97 0.88 6.02 4.20 0.72 0.10 86 Country Sample 1,330 d/ 17.77 5.80 1.94 3.)4 a/ Dats aostly for 1980-81 b/ Includes State and local tax r-venue c/ 1980-82 d/ Average for group of countries of Developing Countries.o V. 1987. 'Quantitative Characteristicsof the Tax System Source: Tasi, Developing Countries. World Bank. In D. Newbery and N. Stern, ads., The Th-ory of Taxation for C ANNEX I - 102 - Table I.2: Central Government Tax Revenues, Selected Years, 1970-1986 (PercentageComposition) 1970-71 1975-76 1979-80 1985-86 I. Direct Taxes 16.8 19.4 15.6 17.7 A. Personal Income 3.1 3.9 3.5 4.7 B. Business Income 9.8 13.1 10.9 10.4 C. Property 3.9 2.4 1.2 2.5 II. Indirect Taxes 83.2 80.6 84.4 82.2 A. Inter. Trade 31.0 31.4 38.4 12.5 1. Imports 25.5 19.4 17.5 11.8 2. Exports 5.5 12.0 20.9 0.7 Coffee 5.2 6.9 18.9 0.4 B. Domest. Trans. 52.2 49.2 46.0 69.7 1. Excises 24.4 18.4 14.5 17.0 2. Stamp Taxes 23.9 27.3 28.2 7.8 3. Value-Added - - - 30.7 4. Other 4.0 3.5 3.3 14.21 III. Total Tax Revenues 100.0 100.0 100.0 100.0 1/ Includes a tax on foreign transactionswhich was eliminated when temporary export taxes were introduced in 1986. Source: Ministry of Finance. Table 1.3: Income Tax in Selected Countries, 1984 Top1 Total Tax Marginal as Rate Z of GDP Costa Rica 50.0 4.0 El Salvador 30.0 2.0 Honduras 40.0 3.7 Dominican Republic 46.0 2.0 Panama 50.0 6.2 Mexico 42.0 4.2 Guatemala 42.0 1.6 1/ Corporate Income Tax Rate Source: Business Latin America, May 11, 1987 (p. 148) and World Bank. ANNEXI - 103 - The 1987 Tax Reform 4. As part of its fiscal modernizationprogram, the Government submitted to Congress a tax reform proposal in September 1987. Strong private sector opposition to the reforms led to significant revision in the version ultimately approved by Congress in late 1987. Highlights of the 1987 tax reform are summarized below. (i) Personal Income Tax. The number of tax brackets were reduced from 68 to 16. Marginal rates ranging from 5 percent of taxable income up to Ql,000 to 48 percent of taxable income over Q500,000 were reduced to rates ranging from 4 percent of taxable income up to Q5,000 to 34 percent for taxable income over Q130,000. Personal deductions were increased significantly: for a " typical" taxpayer with a family of five members, deduction were nearly doubled and may reach Q20,000, or about 16 times the minimum salary. (ii) Corporate Income Tax. The number of tax brackets were reduced from five to three. Marginal rates ranging from a minimum of 5 percent for taxable income up to Q5,000 to a maximum of 42 percent for income over Q2 million were reduced to 12 percent for taxable incomes up to Q30,000, 22 percent for taxable incomes between Q30,001 to Q60,000 and 34 percent for taxable incomes over Q60,000. These latter rates are proportional. A 33 percent automatic deduction on reinvestmentof profits was abolished. (iii) Other Important Modifications to the Income Tax were as follows: (a) Banks were subjected to a minimum tax of 18 percent on net income including exempt income or 34 percent on net income excluding exempt income, whichever is higher; (b) limits on deductions were introduced inter alia on the following items: (i) Christmas bonus (aguinaldo)was limited to 200 percent of monthly wage; (ii) deductions for business expenses (including interest) were allowed only on items related to business; and (iii) interest on non-banking borrowingwas limited to maximum legal interest rates; (c) periodic quarterly payments for corporations (pagos a cuenta) were established and tax retention rules made clearer; and (d) a presumptive income tax for professionalswas established. (iv) Import Tax. Tariffs on imports were increased by 4 percent. Products exempt from this new tax include petroleum products and derivatives, some basic foodstuffs and medicines. The rate is to be gradually reduced to one percent by 1992. (v) Property Tax. The new law consolidatesthe original legislation dating from 1921 as well as its subsequent amendments and unifies the tax rates set by the Central Government and the main (4) municipalities. The changes are as follows: ANNEX I - 104 - Old Law New Law Property value. Q 5,000 exempt Q 2,000 exempt Up to: Q20,0Q° 0.3% Q20,000 C.2X Q50,000 0.6% Q70,000 0.62 Over Q50,000 0.8% Q70,000 0.9% In addition to 0.8 percent under the old law, four municipalities charged an additiona: 0.35 percent for the highest bracket. Under the new law the full 0.2 percent and half of ;he revenues collected by the 0.6 percent and 0.9 percent will be retained by the municipalities. These rates apply to the value of all property taken together independentlyof their location. The tax base comprises the value of (') land; (ii) structures;and (iii) permanent crops. The new law requires taxpayers to determine the value of their own properties (autovaluo). (vi) Value Added Tax (VAT). The revised law maintains the rate of 7 percent but limits tax reimbursementsto purchases of goods and services used in generating taxable income. It classifies traditional exports and the constructionindustry as final consumers, which under the previous law were taxed at zero rates enjoying, therefore, tax reimbursementprivileges. Under the new law, tax credits granted for the purchase of capital goods used as inputs will not be awarded immediatelybut spread over a five year period. (vii) Stamp Tax. The stamp tax covers transactionsnot covered by the VAT such as rents of properties, real state contracts, transportationservices, financial services, insurance and dividends. Under the new law the coverage of the stamp tax is enlarged to bonos de prenda, a negotiable certificate issued by warehouses. (viii) Tax on Circulation of Vehicles. Changes the tax from specific to ad valorem based on the market value of the vehicles. The new tax schedule ranges from 1 percent for cars one year old to 0.1 percent for those with more than 9 years. Tax Revenue Outlook 5. Notwithstandingthe 1987 tax reform, tax revenues are not expected to increase in the next few years. It should be noted however that t"is is mostly due to the phasing out of export taxes and the phased reduction in the 4 percent increase in import tariffs. Revenue projections for 1988-91 indicate that the tax burden would increase from 8.2 percent of GDP in 1987 to 8.8 percent in 1988, but would decline gradually thereafter to pre- reform levels of 7.8 percent of GDP in 1991 (Chapter I, Table 1.3). It should be also noted that the Government's planned reduction in import tariffs under Common Market Arrangements, as part of its effort to promote a more competitive industrial sector has not been taken into consideration, however preliminary estimates indicate that its fiscal revenue impact would be marginal. ANNEX I - 105 - A Proposed Agenda for Future Reform 6. Although the 1987 tax reform introduced importantmodifications to the tax regime, the revenue projections underscore the urgent need to improve tax collections. The ongoing Ministry of Finance efforts to modernize tax administrationtherefore need to be accelerated. Specifically, there is a need to i) strengthen tax fiscalizationand enforcement; ii) reorganize the Ministry of Finance along functional lines and establish unified procedures for administering the different taxes; iii) simplify tax legislation along the lines suggested below; iv) strengthen data processing; v) improve training and career incentives; and vi) strengthen the coordinationof technical assistance. These issues are discussed in greater detail in a recently completed Fiscal Management Report. A suggested agenda for future tax reform is summarized below. Tax and Customs AdministratLon 7. The major problem of tax administrationhas been one of enforcement. Tax fiscalizationhas been totally inadequate. In 1987 there were about 70 tax inspectors for the 83,000 registered income taxpayers and 50 tax inspector for the 26,000 VAT taxpayers. Ta. audits have averaged about 200 per year. There is therefore an urgent need to design a system for the supervision and inspection for better ensuring taxpayer compliance. Concentrating fiscalizationefforts on the large taxpayers would be appropriate. However, the creation of a unit to focus on large taxpayers must be accompanied by a strong commitment to follow through against tax delinquents. 8. Tax administrationcould also be better structured if the Ministry of Finance was organized by functions rather than having one department for each major tax. Specializedunits should be established to handle those activities that are common to all taxes (i.e.,administration,tax control, fiscalizationand auditing, and enforcement)and the manager for each functional unit made responsible for each activity. Once these functions are specified, a unified system of procedures -or all taxes could be established thus facilitatingreview and enforcement. The simplification of tax forms and the streamliningof paperwork are additional measures that could be taken quickly and incorporatedin the draft tax code presently being discussrd. Other actions may require additional study such as: (i) determining which taxes are not cost effective to collect and should be eliminated; (ii) making an inventory of special regimes and eliminating those that are no longer justified; and (iii) further simplifyingthe tax base by eliminating the exemptions and deductions which remain in the law and have very little justification. 9. Corruption has been the major problem affecting Customs. In addition, it also suffers from acute technical deficiencies including: (i) inefficient systems of classification,valuation and appraisal; (ii) lack of expertise in special regimes; (iii) complex administrative procedures; and (iv) extremely poor physical facilities including laboratories. The Ministry of Finance has been seeking to address these issues but it still lack a master plan which sets out the new organization, operational procedures and training needs. Specific tasks that need to be carried out include: (i) recompilationof all customs legislation including ANNEX I - 106 - special regimes; (ii) design of new import and export forms to enable computer processing; (ii) modification of customs' bylaws to simplify procedures; and (iv) strengtheningof customs' capabilitiesto audit major import and export firms and combat contraband. Personal Income tax 10. The base of the income tax should include all sources of income. This is not the zase in Guatemala. Interest income on bank deposits is exempt from the tax base and, under the new law, dividends, insurance payments, and grants are also exempt. In addition, personal deductions were increased significantlyand over 95 percent of workers and professionalsmay be exempt from income tax. 11. In most countries, a significantpart of the income tax is paid by a large number of taxpayers in small amounts. This is important not only from a revenue perspective but also because it fosters the habit of paying taxes among the population. In Guatemala, not only is the tax base too narrow but deductions are extremely generous. Consideration should be given to reducing personal deductions and linking them to the minimum wage rather than to marital status or number of dependents. This would not only increase the tax base but also simplify tax administration,and curb fraud. Exemptions on grants and donations should also be limited to close relatives. Interest income on bank deposits should be taxed. Since it may not be practical to tax interest income at the individual level because of administrativedifficulties, consideration should be given to retain, say, 15 or 20 percent of interest income over some minimum amount (say the first Q3,000). As tax administrationcapacity is improved, dividend income should be added again to personal income and tax credits granted on payments made by corporationson behalf of shareholders. Excluding dividend and interest income from individual taxable income may be inequitable and regressive since a lower tax rate may apply to fractional incomes. Corporate Income Tax 12. Under the previous law there was a fixed amount of tax payment for each tax bracket and the tax rate was applied to the excess of income over that fixed amount. In contrast, the new rates apply directly to the declared income and therefore create large discontinuitiesin the rates. For instance, the marginal rate for declared incomes of Q31,000 in relation to declared income of Q30,000 is 322 percent. This gives a strong incentive for underreportingincome and for the artificial fragmentingof enterprises. Corporate tax is also exempt from interest income on banking accounts. 13. The principal suggestions for corporate income tax changes are: (i) interest income should be taxed to limit the current incentive for corporate recourse to debt financing rather than equity finance; and (ii) a flat corporate income tax rate of 34 percent should be instituted to replace the current three proportionalrates. This latter measure, which was part of the original MOF tax proposal, would greatly simplify tax administration. ANNEX I - 107 - Value Added Tax 14. The VAT in Guatemala has four regimes: a general regime in which a 7 percent rate is charged on the sale of goods and services with tax credits granted on the VAT paid on inputs; a zero rate regime for basic foods and non-traditionalexports under which no tax is paid on the final product and fiscal credits are granted for the purchase of inputs; a broad exemption regime for the bus industry and private schools uniderwhich the beneficiariesdo not pay tax on inputs by using an exemption card and do not charge it on their sales; and a final consumption regime. The construction industry, banking services, and traditional exporters have been placed under this latter regime which implies that they do not receive credits on taxes paid on inputs but do not charge VAT on their sales of goods or services. 15. The VAT could be further simplified by changing some of its current regimes. Possible modifications could include: i) incorporating the transport and construction industries into the general regime; ii) including educational institutionswhich by Constitution are exempt from the tax into the zero rate regime and abolish the exemption card; and iii) incorporatingtraditional exports into the zero tax regime since they already may deduct VAT paid on inputs from their income tax. Consideration should also be given to expand VAT coverage to a~ctivitiescurrently subject to the stamp tax, such as banking services, rentals, and insurance premiums. Finally, the new 5-year credit rule for capital goods (paragraph 4 (vi) not only introduces a disincentive to investment but also makes the VAT more difficult to administer. The immediate credit on the purchase of capital goods should, therefore, being reinstated. Property Tax 16. Property taxes which were collected by the municipalitiesand the Government were unified under the new law as the Impuesto Unico Sobre Innuebles and their administrationcentralized in the Ministry of Finance. Part of the revenues collected will be earmarked for the municipalities; the other part will be equally shared by the national treasury and the municipalities (paragraph 4 (v)). In addition, the new law changed the characteristicof the property tax from one that taxes property to one that taxes asset holdings. The tax rate is applied to the value of all properties taken together independentlyof their location rather than to individual properties. 17. In most countries property taxes are a local tax. The recent reform not only changed that characteristicof the tax but also centralized its administrationin the Ministry of Finance. Consideration should be given to transferring responsibilityfor this tax back to the municipalities, particularly in light of the Government'semphasis on decentralizationand strengtheninglocal community involvement in meeting local needs. ANNEX I - 108 - Special Regimes 18. Fiscal incentiveshave been granted for a multitude of activities, many without a proper assessment of their fiscal costs and potential benefits. In some cases, the original justification for the incentive has been forgotten since the incentive has been on the books for decades. Under the 1987 tax reform, the Government started to tackle this issue and revised the fiscal incentive law for the chicken industry,which will start paying income taxes for the first time in 27 years. Other industries under special regimes include: (i) tourism; (ii) meat and milk; and (iii) forestry. In addition, there are special regimes for industrial decentralization,agricultural development, free zones, and non-traditional exports. 19. The Ministry of Finance should make and inventory of all special regimes in effect, and ascertain whether they continue to be justified or not. InstitutionalAspects 20. The analysis of the tax regime should be a continuing task. Accordinglv,MOF's authorities are planning to create a specializedtax unit which would be in charge of analyzing the economic, equity and revenue aspects of current tax laws and possible changes and additions. It is suggested that this unit be established as soon as possible. The preceding paragraphs offer an initial agenda for the work of this unit. The unit could play an important role in simplifying existing tax legislation,thus facilitatingtax administration. - 109 - ANNEX II MACROECONOMICPROJECTIONS Introduction 1. Guatemala'sresource base is diversified,including a wide variety of soils and climatic conditions suitable for both tropical and cool weather crops; substantialhydro-electric power potential; some petroleum (6,000 barrels per day were produced in 1986); a year-longtemperate climate in the highlands; and tourist attractions. The country has a good potentialfor expandingtourism as well as the export of flowers, shrimp, rubber, citrus and tropical fruits, off-seasoncool weather fruits and vegetables,and light manufactures. This potential is supportedby a privileged locationclose to the Mexican and U.S. markets and by easily trainablemanpower and a fairly skilled group of entrepreneurs. 2. To start taking more advantageof this potential,the Government needs to overcome major structuralobstacles. These include the heavy dependenceon a few primary exports and on the depressedCACM market, which is reinforcedby the strong anti-expertbias in the trade and price regimes; the low le-el of savings and investment;and the country's severe economic dualism,with the wide disparity in income and social conditions. This will require an expanded Goverrnmenteffort to i) consolidatethe gains achieved in stabilizingthe economy; ii) stimulatethe growth of exports and economic diversificationthrough trade reform and stronger institutionalsupport for exporters;iii) improve the efficiencyof public resourceuse while increasingthe availabilityof resources;and iv) expand the delivery of essential goods and services. Scenario for Renewed Growth 3. The economic projectionsshown in Table II.1 (High Case Scenario) below assume that the Governmentsucceeds in moving forwardwith a major aditjstmenteffort, and that the country will be able to achieve GDP growth rates of between 4 to 5 percent over the next 7 to 8 years. Achievementof such a level of growth would require a major domestic effort to increase savings and investmentas well as continuedexternal support. Accordingly, the scenario assumes that i) the ongoing stabilizationeffort stays on cottrseand further substantialcapital flight is avoided; ii) the competitivenessof the Quetzal is maintainedand the Government implements its planned trade and export promotion reforms in a timely manner; iii) foreign private investmentis forthcomingto take advantageof new export opportunities;iv) financialsector policies are successful in promoting savings and making available the resourcesneeded for the expandingexport industries;v) public savings and investmentrecover both to support the export drive and provide a minimum of social services;and vi) external supportmaterializes in the amounts and timing required. 4. More specifically,the scenario assumes that the efficiencyof capital (as measured by the incrementalcapital-output ratio or ICOR) averages 3.7, which implies that gross fixed investmentwould need to grow gradually from about 14 percent of GDP in 1988 to 19.5 percent in 1995. Increasedinvestment will result from both the gradual recoveryof private fixed investment(from 11.3 percent of GDP in 1988 to 14.5 percent in the - 110 - Tabl II.1 - KEY ECONOHICINDICATORS (HIOH CASESCENARIO Act. Pro. Projected 1987 1988 1989 1990 1991 1992 1993 1994 1995 Growth Rates (percent)- CDP 3.11...... 3.5% 4.0% 4.0% 4.5% 4.51 6.0% 5.0% 5.01 GDP per capits 0.31 0.7% 1.2% 1.4% 1.9% 1.9% 2.3% 2.3% 2.31 Consumption ...... 7. 4.0% 2.0% 2.1% 2.7% 2.8% 3.3% 4.4% 4.3% Consumption per capita 0...... 11.2% -0.8% -0.5% 0.11 0.21 0.71 1.8% 1.71 Debt Indicators : MLTDOD (Mil lion USS) */ 2,627...... 26272,434 2,944 3,315 3,611 3,8091 4,222 4,538 4,817 IMF CREDIT (Million LISS) 5 9 59 94 147 136 72 8 8 8 8 MLT DOD/Exports GUS (%) ...... 224.9 185.6 194.8 194.5 188.1 181.0 174.7 166.2 155.7 MLT DOD/Current CDP (1) 36...... 30.9 34.6 36.3 36.9 36.9 36.7 35.7 34.2 Debt service MLT (Million USS) b/ 5 516 543 422 483 574 613 711 812 876 Debt service MLT/Current GDP (%) 7.2 6.9 S.0 5.3 5.9 5.8 6.2 6.4 6.2 Debt aervice MLT/Exports GAS (1) 44.... 41.4 27.9 28.4 29.9 28.5 29.4 29.8 28.3 Interest MLT (Million US) b/. 178 178 179 220 271 299 323 341 352 361 Interest MLT/Exports GAS (%) 15.2...... 13.7 14.6 15.9 15.6 15.0 14.1 12 9 11.7 Interest MLT/Current ODP (%) 2.5 2.3 2.6 3.0 3.1 3.1 3.0 2.8 2.6 National Accounts as % of current CDP: Total Investment 13.8 14.1 15.5 16.5 17.5 18.5 19.5 19.5 19.5 Public Investment 2.8...... 2.8 3.5 4.2 5.0 5.0 5.0 5.0 5.0 Private Investment 11...... 11.3 12.0 12.3 12.5 13.5 14.5 14.5 14.5 Domestic Savings ...... 7.3 8.0 10.0 11.9 13.7 15.3 16.8 17.2 17.7 National Savings ...... 5.9 6.9 8.6 10.1 11.8 13.4 15.0 15.6 16.2 Public Savings 1...... 1.2 0.6 1.3 2.0 2.5 2.5 2.5 2.5 Private Savings ...... 9.9 5.7 8.0 8.8 9.8 10.9 12.5 13.1 13.7 foreign Savings 7.9 7.2 6.9 6.4 5.7 5.1 4.5 3.9 3.3 ICOR ...... 3.9 3.4 3.7 3.5 3.7 3.5 3.7 3.7 External Trade Indicators (percent): Exports ONPS real growth rate ...... 0.0 4.2 9.0 8.8 8.6 7.6 7.9 8.1 8.3 Exports CNFSnominal growth rate 10.5 16.9 20.2 18.3 18.9 17.4 17.0 16.1 16.3 Exports of ONFS/Current GOP , 16.0 16.0 17.2 18.1 19.1 19.8 20.4 20.9 21.5 Imports CNFSreal growth rate 47.0 5.4 4.1 4.3 4.9 4.9 5.4 5.4 5.4 Imports CWS nominal growth rate 70.7 15.0 14.8 12.5 13.7 13.6 14.0 13.8 13.8 Imports of CNFS/Current GDP 22.4...... 22.2 22.7 22.7 22.9 23.0 23.1 23.2 23.3 MELAS(incl. NFS) 15.2 1.5 1.0 1.1 1.1 1.1 1.1 1.1 1.1 Current Account/Current GOP ... -7.9 -7.2 -6.9 -6.4 -5.7 -5.1 -4.5 -3.9 -3.3 Resource 8alance/Current GDP -6.5 -6.1 -5.5 -4.6 -3.8 -3.2 -2.7 -2.3 -1.8 Terms of Trade Index (1987 - 100) 100.0 103.3 103.4 104.4 105.6 106.5 106.9 106 3 105.7 BOP (miflion USS): Current Account ( 5 6 °) (562) (567) (588) (582) (555) (535) (515) (496) (460) Exports of Goods & Serviceos...... 1,168 1,311 1,512 1.705 1,920 2,150 2,417 2.729 3,093 CDP (million USS) 7,1 2 3 7,123 7,877 8,519 9,125 9,774 10,541 11.511 12.727 14,085 CDP conversion factor 2 47 2 60 2 70 2 83 2 98 3 12 3 24 3 32 3 41 a/. Includes use of IMF credit, refinancing, accumulated debt service arrears end bonded arrears. b/. Includes bonded arrearsand refinancing. Calculated on accrual basis. Source: World Bank estimates - 111 - ANNEX II 1990s), as well as an increase in public sector investment (from 2.8 percent in 1988 to 5 percent in 1991 and thereafter). This would require not only continued domestic stability, but also effective policies to promote exports, a significant strengtheningof public sector implementationcapacity and continued access to external credit. Foreign direct private investment is expect to make a significant contribution, averaging about US$100 million per year. At the same time, the projections assume a substantial improvement in domestic savings which increase from 8 percent of GDP in 1988 to 18 percent in 1995. This savings effort would not only require continued austerity in public expenditure policies, but aiso a significanteffort to increase public savings from 1.2 percent in 1988 to 2.5 percent in the 1990s, as well as improved incentives for private savings through realistic interest and exchange rate policies. The level of savings required is essential if the additional growth in the economy is to be achieved without an unsustainable level of external borrowing. 5. With respect to the projected level of exports, the projections assume that the longer term prospects for Guatemala's traditional exports coffee, sugar, cotton, and meat) are limited given expected world market demand/supply balances, and that the bulk of the increases in export earnings will come from the expansion of non-traditionalexports such as fruits, vegetables and flowers. Market prospects for these latter products are favorable, especially in U.S. markets. Moreover, substantial growth has been recorded in recent years, with non-traditionalexports nearly doubling from US$128 million in 1986 to US$215 million in 1988. Assuming an appropriate set of policy incentives are put in place and institutional and infrastructuresupport is forthcoming,nontraditional export earnings could double (in real terms) to US$580 million by the mid-1990s. 6. There are also good opportunities to expand tourism earnings given Guatemala's attractive natural and cultural resources. The recent strong recovery of the tourism industry, albeit from very depressed levels, is encouraging,with earnings growing from US$13 million in 1985 to a estimated level of US$63 million in 1988. Assuming continued domestic tranquillity, the tourism industry could double its earnings in real terms by the mid-1990s. 7. An adequate level of imports will be required to sustain the projected level of GDP growth and exports. Import volume growth of capital and intermediategoods have seem projected to increase faster than GDP as the restructuringof the economy accelerates. Imports of consumer goods and petroleum are projected to grow in line with GDP 8. Although the terms of trade are projected to remain at present levels, export growth would outpace imports and the resource balance would gradually improve from a deficit of US$483 million in 1988 (6.1 percent .of GDP) to about US$258 million in 1995 (1.8 percent of GDP). As a result, the current account deficit of the balance of payments would decline from 7.2 percent of GDP to a more sustainable level of 3.3 percent in 1995. The balance of payments projections are shown in table 11.2. - 112 - Table 11.2 Balance of Payments (HiahCaoe Scenario (US mil lion 1986 1987 1961i 1989 1990 1991 1992 1993 1994 1995 Goods and Services Balance (94) (633) (647) (673) (672) (650) (635) (625) (616) (590) Trade Balance 168 (355) (372) (353) (319) (286) (257) (238) (229) (209) Exports of Coods 1,044 978 1,105 1,279 1,434 1,607 1,800 2,022 2,280 2,580 Imports of Coods 876 1,333 1,477 1,632 1,752 1,893 2,056 2,260 2,509 2,789 NFS Balanco (63) (106) (111) (116) (103) (87) (80) (72) (62) (48) Exports of NFS 117 159 158 183 21' 255 289 331 383 445 Imports of NFS 180 265 269 298 319 342 369 403 446 493 Balance of Coods and NFS 105 (461) (483) (469) (422) (373) (336) (310) (291) (258) Not Factor Income (199) (172) (164) (204) (250) (277) (298) (316) (325) (332) Factor Receipts 33 31 48 50 55 s8 60 63 66 69 Interest on Reserves 25 25 22 22 24 24 24 23 21 20 Other FR 9 6 26 28 30 33 37 41 45 49 Factor Payments (232) (203) (212) (254) (305) (334) (359) (379) (391) (401) Interest on ST Debt (16) (10) (16) (16) (16) (i6) (16) (16) (16) (16) Interest on MLT + IMF (217) (178) f179) (220) (271) (299) (323) (341) (352) (361) Dividend Repatriation 0 0 0 0 0 0 0 0 0 0 Other FP 1 (15) (17) (18) (18) (19) (20) (21) (22) (24) Net Current Transfers 51 70 80 85 90 95 100 110 120 130 Current Account Balance (43) (563) (567) (588) (582) (555) (535) (515) (496) (460) Official Crants 48 126 104 100 100 95 90 85 80 80 Net Direct Foreign Investment 69 91 90 90 100 100 100 100 100 100 Debt Conversion 0 0 0 0 0 0 0 0 0 0 Net MLT Capital Fiows 15 (171) (2) 165 116 103 112 20 (62) (116) Disbursements 184 125 261 352 309 314 338 353 361 361 Amortizations a./ (169) (296) (263) (187) (194) (211) (226) (333) (423) (477) Payment of Stabilization Bonds b.f (10) (22) (76) 0 0 0 0 (37) (37) (37) Debt Service Arrears 62 221 (121) (267) 0 0 0 0 0 0 Refinancing b./ 0 46 121 267 0 0 0 0 0 0 Unidentified Sources 0 (0) 0 293 266 257 233 347 415 433 Net Short Ter. Capital 47 300 265 0 0 0 0 0 0 0 Errors and Omissions (188) (68) 95 0 0 0 0 0 0 0 Change in Nat Reserves 0 40 91 (60) 0 0 0 0 0 0 Net IMF Credit (56) (20) 35 53 (11) (64) (54) ) r O s.1 Included payments of projected unidentified sources of finance Excludes amortization of stabilization bonds. 8 b./ For 1988,841ml. payed in cash, 31ml. using lines of credit from IDB, and S151ml. exchanged for Q. denominated bonds Source: World Bank setimates - 113 - ANNEX II 9. To achieve the projected level of growth, Guatemala will require substantial financial support in the next few years. The scenario assumes that the ongoing negotiations to refinance about US$267 million in payment arrears would be concluded during 1989 and official grants (mostly from the United States) would average about US$90 million per year, whi_h is in line with recent trends. Gross disbursementsfrom financial institutionswould average about US$75 million (including roll over of existing obligations); With respect to bilateral lending, gross disbursements from the existing pipeline are projected to average about US$30 million per year. Nevertheless, even with this level of external assistance, coupled with a sharp increase in gross disbursementsfLcmi multilateral institutions (which would increase from about US$100 million in 1988 to an average of US$200 million per year, including quick disbursing loans), the projections show a large unfinanced gap of about US$280 million per year. One-third of this gap could be filled by suppliers credit to the private sector. The remaining US$180 million gap would have to be financed with additional assistance from bilateral or other sources (including additional refinancing), if the growth targets are to be achieved. Should the additional resources not be secured, annual GDP growth would most likely not surpass ^.9 percent (down from 4.6 percent in the higb case scenario), with marginal gains in per capita income. 10. With respect to debt service requirements,the scenario shows an improvement in all debt indicators by the mid-1990s (see Table II.1) External debt-to-exportsratio would decline from about 186 percent in 1988 to 156 percent in 1995. The debt service ratio (after refinancing)would decline from 41 percent in 1988 to 28 percent in 1995. Interest payments on medium and long term debt would peak at 3.1 percent of GDP in 1991-92 and decline below 3 percent in 1995. Fiscal Projections 11. The proposed public investment program for 1988-91, which is discussed in detail in the main text, is consistent with the high case scenario. The proposed investment program was put together by identifying ongoing and new projects that could start during the period, either financed by external sources or local resources. The level of investment contemplatedwould increase capital outlays from 2.8 percent of GDP in 1988 to 4.4 percent in 1989 and to 4.7 percent in 1990 (Table I1.3). For 1991, there is a drop in the project pipeline, and identified investment expenditureswould decline to 4.6 percent of GDP. However, it was assumed that the Government would strive to increase investment to a the minimum level of 5.0 percent of GDP starting in 1991 a level that is considered necessary to support a minimum improvement in basic services and the social sectors. 12. Public sector consumption expenditures (wages and purchase of goods and services) are projected to lag only slightly behind the change in nominal GDP after 1989. This would still allow the Government to allocated additional resources to the social sectors (i.e. education materials and preventive medicines) or pay higher wages for employees with strategic skills (i.e. teachers, health workers, project managers or tax auditors), since the growth in other expenditure categories may be kept in check. As regards revenue projections, they were based on a detailed analysis of the implications of the 1987 tax reform on revenue performance as well as on - 114 - ANNEX II the projected growth of GDP, and the growth of imports and exports in terms of both volume and prices. Table II.3 Non-FinancialPublic Sector (Percentageof GDP) Est. Projected 1988 1989 1990 1991 Current Revenues 12.9 13.1 12.4 12.2 Current Expenditures 11.7 12.5 12.4 12.2 Current Account 1.2 0.6 -0.1 -0.0 Capital Revenues 0.2 0.1 0.1 0.1 Capital Expenditures 2.8 4.4 4.7 5.0 Overall Balance (Deficit) -1.4 -3.7 -4.7 -4.9 Grants 0.9 1.0 0.9 0.8 Net External Financing 1.l -0.0 1.7 1.8 1.8 Net Domestic Financing 0.5 0.3 0.3 0.3 Financing Gap - 0.8 1.8 2.0 1/ Includes balance of payments support. Source: Ministry of Finance and World Bank estimates. 13. The projections show a fiscal gap of about 2 percent of GDP after taking into account additional financing expected from: i) disbursementson foreign loans consistent with the projected level of investment, ii) counterpart generated by official grants (equivalentto nearly 1 percent of GDP during the period), and iii) counterpart generated by balance of payments loans (averaging0.6 percent of GDP), and iv) domestic credit. With respect to domestic financing, it was assumed that the Government's net domestic credit target for 1989 (0.3 percent of GDP) would be kept in the following years. Although increased recourse to domestic finance could close the financing gap and provide counterpart for the proposed investment program, this would either crowd out private credit and investment and/or be inflationary. Additional foreign borrowing could also fill the gap, but would place the economy in the low saving scenario/high debt scenario described in Chapter I. Another option would be to seek additional grant financing. Although this would be preferable to additional borrowing, there is the danger of becoming too dependent on foreign grants which are already financing a share of recurrent expenditures. Still another option would be to cut non-investment expenditures below the levels projected here. Although there is room to cut recurrent expendituresin selected sectors, there is also the need to increase recurrent expenditures in the social sectors, agriculture (i.e., extension), and maintenance of basic infrastructure. The proposed increase in investment in these sectors would also lead to additional recurrent expenditures in the future. Thus, more than cutting the overall level of recurrent expenditures,there would be a need to reallocate them to priority areas. The desired course of action therefore would be to raise - 115 - ANNEX II additional resources by increasing revenues, through improved tax administration,higher tariffs and user charges, and additional tax measures. Failing to secure additional resources, the likely outcome would be spreading the implementationof ongoing projects over a longer period, while postponing the start of new projects, the typical occurrence in recent years. The consequenceswould obviously be less public support for economic recovery and further delays in the payment of the Social Debt. ANNEX Ill - 116 - The Role of NGOs in Guatemala 1. NGOs have traditionallyplayed an important role in Guatemala's development effort, reflecting in part their comparative advantage in community developmentwork, especially taking into account the ethnic and cultural diversity of Guatemala, as well the fact that the public sector's role has been restrictedby resource constraints and its generally limited project execution capacity. Although there are several thousand local NGO associations,community groups and other such entities active in Guatemala, the bulk of the NGO contribution is presently being carried out by about 200 larger NGOs, which provide financial,managerial and technical assistance for develorient programs in local communities,often working through smaller local groups. Over the past two to three years this group of larger, intermediaryNGOs, have expanded both in number as well as in the size and complexity of their operations. At the same time, many of the NGOs have begun to do more forward planning of their activities while also diversifyingtheir sources of income from InternationalNGOs, Government, and bilateral and multilateral aid institutions. In addition, three NGO consortia have been established of which the largest is ASINDES. These consortia are in the process of developing their capacity to provide management, financial and technical support to their membership and the NGO community as a whole. 2. Bilateral and multilateral funding of NGOs has increased substantiallyover the past two years. Available estimates indicate that of the 200 intermediaryNGOs, over 160 are receiving funding in cash, materials and/or human resources from the United States alone. Other major sources of funding include European Governments and foundations. Funding through the Government is also increasing. ASINDES is currently negotiating a Q 8.0 million grant financing arrangementwith the Ministry of Finance to utilize PL480 funds to support NGO programs developing commerciallyviable income generation activities. There are also a number of direct or indirect subcontractingarrangements between Government ministries and NGOs to help fund NGO initiatives in agr'culture,small scale industry, marketing, housing and other areas. 3. Based on a preliminary survey of 25 of the intermediaryNGOs, the total development contributionof this sample group is estimated at about Q 50 million during 1988 excluding a Food for Work program which is being implementedby one of the NGOs, with an estimated expenditure of Q57 million for 1988. Since the activities of this sample group are estimated to cover about 40 to 50 percent of all major NGO programs, total annual development activities of NGOs in Guatemala would be on the order of QlOO million. This level of expenditure equals about 0.5 percent of GDP, which is significant. ANNEX III - 117 - TABLE 111.1 NGO DEVELOPMENT ACTIVITIES, BY SECTOR, 1988 (Q millions) Agriculture 16.3 Community Development 2.7 Education 10.2 Health 10.3 Housing 3.2 Small Enterprise Development 3.2 Public Works 0.7 Water and Sanitation 3.0 Subtotal 49.4 Food for Work Program 57.4 Total 106.8 Source: World Bank estimates 4. NGOs in Guatemala have a wealth of experience in designing and operating development programs targeted at the urban and rural poor. This know how can be built upon and more effectively utilized and supported by Government and external donors to accelerate Guatenialadevelopment. Such an effort will require time and careful nurturing to develop a sound three-way partnership. On the part of the Government this would require i) assistance in improving the coordinationand implementationof laws and procedures involving NGOs, including for example improved Government procedures for expediting importationof materials donated for NGO sponsored development activities; ii) improved coordinationbetween ministries with respect to development projects and programs involving NGOs to avoid duplicationof effort, ensure a consistent policy framework,and establish priorities; and iii) a willingness to involve NGOs in the process of designing developmentprograms and policies. With respect to external agencies, increasingcooperation with NGOs will require a much stronger effort to learn about NGO programs and development approaches, including a concerted effort to explore and development specific project components which could be handled by NGOs during the project preparation phase. On the part -f NGOs, increased involvementwith Government and external agencies will require a stronger effort to publicize programs and development efforts and a willingness to accept the additional controls and additional time needed to collaboratewith Government and external agencies. As part of this effort NGOs, possibly through the existing NGO consortia should seek to identify a small number of projects and development approacheswhich appear to have potential for expanding on a larger scale. - 118 - STATISTICALAPPENDIX Section I: Standard Tables 1.1 National Accounts Summary, GDP in Current Quetzales 1.2 National Accounts Summary, GDP in 1958 Quetzales 1.3 Implicit Deflators (1958=100) 1.4 Balance of Payments in (1975-1987) 1.5 National Accounts Summary, GDP in 1980 Quetzales 1.6 Implicit Deflators (1980=100) 1.7 External Debt, Disbursements and Repayments 1.8 External Trade (1975-1987) 1.9 ConsolidatedNon-Financial Public Sector (1975-1987) 1.10 Monetary Statistics (1975-1987) 1.11 Selected Economic Indicators (1975-1987) 1.12 ConsolidatedNon-Financial Public Sector (1988-1991) Section II: Public Sector InvestmentProgram (1988-1991) 2.1 Education Sector 2.2 Health Sector 2.3 Agriculture Sector 2.4 Transport Sector 2.5 Water Supply Sector 2.6 CommunicationsSector 2.7 Power Sector 2.8 Housing and Urban Development 2.9 Investment Program by Sector 2.10 Investment by Institution 2.11 Investment by Financing Source and Type of Financing Section III: Sector Tables 3.1 Comparative Expenditures in Agriculture (1980) 3.2 Historical and Projected Power Demand/Sales 3.3 Power Capacity Balance (MW) 3.4 Global Energy Balance (GWh) 3.5 Power Plant Additions 3.6 Road Network by Type of Pavement (1986) 3.7 Road Development Program Targets (1988-1994) 3.8 Water Supply/SewerageService Levels by Country (1984) 3.9 Water Supply/SewerageService Levels in Guatemala 3.10 Middle Income Latin American Countries Table 1 .1 OUATBW.A- NATIONAL ACCOLUNTSSIMARY (Mill;on Ql-tzalea) Actua I 1975 1976 1977 1978 1979 180 1981 1982 lCS3 1984 1985 1986 1987 1988 COrigin and Use of Reoumrce A.1. CDP at mrket prices 3.646 4,365 5,481 6,071 6,903 7,879 8.608 8.717 9.050 9.470 11,180 15.838 17.595 20,477 2. Net indirect tixna 2F52 317 492 536 543 597 561 539 4i6 437 586 - - - 3. CDP at fector cost 3.394 4.049 4,988 5,535 6,380 7.282 8,047 8.178 8,589 9,033 10,594 15.838 17.59! 20,477 4. Agriculture ------S. Industry ------a. Manufacturing ------. - - - - - b. mining ------c. Other ------_ _- - - - -_ 6. Services, e. ------ B.1. Resource balance (66) (262) (99) (351) (311) (216) (581) (341) (141) (207) (179) 231 (1.141) (1.257) 2. Eaporta OWS 792 942 1.340 1,304 1.474 1,748 1.471 1.289 1.176 1,256 2.068 2,542 2.807 3,284 3. Importa 24NS 858 1,204 1.439 1,655 1.784 1.963 2.032 1,629 1.317 1,464 2.247 2,311 3,948 4,540 C.1. Domestic absorption 3.712 4,628 S,579 6,422 7.214 8,095 9.169 9,058 9.191 9,677 11.359 15.607 18.736 21,733 0.1. Total consumption. etc 3.125 3,693 4,481 5,110 5,920 6,843 7.702 7,824 8,189 8.581 :0,073 13.971 16.306 18.845 2. Private 2,875 3,396 4.127 4,675 5,432 6,216 7,022 7,149 7.501 7,856 9,296 12,847 14.932 17,196 3. General government 250 297 355 43S 488 627 680 675 688 726 777 1,124 1.374 1.649 E.1. ross domeati, investment 587 934 1.098 1,312 1.294 1.252 1,466 1,233 1,002 1,096 1,285 1,637 2.431 2,888 2. Fixed investment 571 900 1,039 1,218 1,286 1.295 1,443 1,310 950 912 1,225 1,593 2.150 2.792 a. Private 442 612 715 n77 883 771 719 784 537 552 924 1,280 1.663 2.216 b. Public 129 288 324 341 433 525 724 546 413 360 301 314 487 576 3. Increaso in stocks 16 34 60 95 8 (44) 23 (76) 52 184 61 43 280 96 Memorandum Iteams C.1. Net factor income from abroad (69) (74) (33) (26) (12) (71) (103) (121) (113) (207) (331) (461) (425) (426) 2. NMt current transfers from abrod 78 198 94 115 127 110 91 63 31 29 20 75 172 208 3. roes national product 3,577 4.292 5,448 6,044 6,891 7,809 8.505 8,596 8.937 9.263 10,849 15.377 17,170 20.050 HI. Gross domestic moving 521 672 1,000 961 983 1,036 906 893 881 889 1.107 1888 1.289 1.631 2. Gross nationsl ezving 330 798 1.061 1.080 1,098 1,075 894 835 779 710 796 1,481 1.037 1,413 I.1. Exports of goods and NFS (BOP) 783 989 1.32S 1,281 1,450 1,748 1,471 1 288 1,176 1.231 1,336 2,542 2,807 3,284 a. Difference with NA (t) -1.2S 2.85 -1.31 -1.85 -1.65 0.03 OOS 0.01 0.OS -2.06 -54.81 0.05 0.06 0.01 2. IPOrts of goods end NFS (BOP) 880 1,201 1,424 1,643 1,784 1,963 2,031 1,629 1,317 1.435 1.452 2.311 3.948 4,540 a. Difference with NA (S) 0.31 -0.21 -1.1S -0.71 0.019 0.01 09. C.= 0.01 -2.01S -54.8% 0.01 0.01 0.01 3. Net factor income (BOP) (66) (44) (27) (18) 3 C71) (103) (121) (113) (203) (214) (436) (425) (426) a. Difference w/ NA (S of ins 1.1) -4.51 -67.S6 -19.91 -SO0.0 576.91 0.1S -0.35 0.2 0.41 -2.11 -54.7S -5.9S 0.01 0.01 4. Net current transfers (BOP) 78 198 94 115 127 110 91 63 31 29 23 112 172 2C8 a. Difference v NA (S of line 1.1) 0.01 0.0% 0.01 0.01 0.01 0.1S -0.11 -0.25 0.31 -0.71 12.61 32.71 0.01 0.01 J.1. IFS conversion rate 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 - 2. SeC Conversion rate 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.15 2.19 2.47 2.60 K.1. CDP at mrket prices (Mill. US$) 3,646 4.365 S.481 6,071 6,903 7,879 8,608 8.717 9,050 9,470 9,722 7.232 7.123 7.877 (Cuatal I -ekl) 31-Jan-89 Table 1 . 2 CJATEALA - NATIONAL ACCOLTS SliARY (Millioi 1958 Quetzales) Actual Pr.. 1975 1106 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 Origin and Use of Resources A.1. CP at market prices 2,353 2.527 2,724 2,860 2,995 3.107 3,128 3,017 2,940 2.954 2.936 2,940 3,032 3,139 2. Net indirect taxes ------3. CDP at factor cost ------4. Agriculture 680 690 717 739 760 772 781 758 745 75' 759 753 780 804 5. Industry 435 508 689 606 645 683 680 641 603 584 577 591 609 636 a. Manufacturing 356 394 436 484 490 517 501 475 466 468 4"5 468 476 - b. Mining and quarrying 2 3 3 5 9 15 10 11 9 8 7 9 8 - c. Other (by difference) 77 112 130 138 146 151 170 155 127 108 106 115 125 - 6. Services, etc. 1,258 1.329 1,439 1,515 1.590 1,652 1,666 1.618 1,592 1.613 1,600 1596 1,643 1,7-0 8.1. Rsource balance 145 73 63 41 129 210 134 176 187 153 204 177 100 100 2. Exporte of goods A NFS 498 830 583 563 812 651 557 510 455 440 454 390 414 431 3. Iporte of goods A NF5 352 457 500 522 483 441 423 334 268 287 250 214 314 331 C.1. Domestic : sorption 2,207 2,453 2,660 2,819 2,865 2.897 2,993 2,841 2,753 2,801 2,732 2,763 2,932 3,039 D.1. Total consumption 1,926 2,062 2.225 2.339 2,449 2.542 2,583 2,509 2,478 2,509 2,498 2,527 2,621 2,720 2. Private 1.778 1,897 2,049 2.151 2.250 2,319 2,351 2,280 2.248 2,273 2,266 2,284 2,364 2,455 3. General government 149 165 176 187 199 223 233 230 230 236 231 243 258 264 E.1. Crows domestic investment 231 391 435 480 417 355 410 331 275 292 236 237 311 319 2. Fixed investment 271 371 406 436 413 373 402 358 258 235 220 229 262 295 a. Private - - - - 289 224 202 199 132 158 161 16? 186 210 o b. Public - - - - 125 149 200 159 106 79 60 62 76 8a 3. Incres- in stockls 10 20 30 45 3 (17) 8 (26) 17 57 16 8 48 25 Memorandue Itei_: 0.1. Net factor income from abroad (47) (46) (16) (17) (17) (38) (48) (53) (49) (77) (80) (82) (66) (60) 2. Net current tranefers from abroad 47 105 45 50 s0 39 30 20 9 8 5 13 27 29 3. Gross national product 2,306 2,481 2,708 2,843 2,978 3,069 3,079 2,964 2,890 2.877 2,857 2,858 2.966 3,080 H.1. Groes domestic saving 254 292 401 370 333 307 293 261 246 251 216 258 220 228 2. Cross national faving 254 351 430 403 366 309 274 229 206 183 141 190 181 197 I1.. Capacity to import 325 357 486 411 399 393 306 264 239 247 230 235 223 239 2. Terse of trade adjustment (172) (173) (98) (152) (213) (258) (251) (248) (216) (194) (224) (158) (191) (192) 3. Cross dometic incom 2,180 2,354 2,626 2,708 2,781 2,849 2,877 2,771 2,724 2,760 2,712 2,785 2.841 2.947 4. Cros national incom 2,134 2,308 2,610 2,691 2,764 2,811 2,828 2,718 2,675 2,683 2,633 2,703 2,775 2,888 (Cu-t_*1 I ski) 31-Jan-89 Table 1.3 CUATEtLA - IWPLICrT DEFLATCR5 (2958-100) Actual Pre. 1975 1q76 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 Orioin and Use of Resources A.1. CDP at mrket prices 155.0 172.8 201.2 212.3 230.5 253.6 275.2 289.0 307.9 320.6 380.8 58.7 580.3 652.2 2. Net indirect terxs ------3. MP at factor cost ------4. Agriculture ------5. Industry - - a. Manufacturing - - b. Mining and quarrying - - c. Other (by difference) - - 6. Services. etc. - - B.1. Terra of Trade (Pa/Pa) 65.3 67.4 82.6 73.0 65.1 60.3 55.0 51.8 52.6 56.0 50.7 60.2 63.9 55.5 2. Exports of goods & NF5 159.2 177.6 237.9 231.7 240.7 268.4 263.9 252.6 258.6 285.4 455.5 651.1 678.0 761.2 3. Imports of goode A NF5 243.7 263.4 287.9 317.3 369.6 445.0 480.2 487.4 491.6 509.6 897.7 1082.0 S257.1 1371.7 Cl. ODoeatic abeorption 168.2 188.6 209.7 227.8 251.8 279.4 306.3 318.9 333.9 345.6 415.7 564.8 639.0 715.1 D.1. Total consumption 162.2 179.1 201.4 218.5 241.8 269.2 298.1 311.8 330.5 342.1 403.5 S52.9 622.0 692.9 2. Private 161.7 179.0 201.4 217.3 241.4 268.1 298.7 313.6 333.7 345.7 410.3 562.8 631.7 700.3 2 3. General o-vrnment 168.6 i80. 201.3 252.2 245.4 281.3 292.5 294.1 299.2 307.6 337.1 462.6 533.1 624.0 E.l. Cross domestic investment 206.9 238.9 252.2 273.2 310.5 352.2 357.7 372.3 364.3 375.3 544.5 691.7 782.1 904.2 2. Fixed investment 210.9 242.4 255.9 279.5 311.1 347.6 359.4 S66.2 368.0 388.4 86.3 697.1 819.2 947.1 a. Private - - - - 295.7 344.2 356.0 384.4 352.9 354.4 575.5 767.3 894.1 1U55.5 1- b. Public - - - - 346.8 352.9 363.0 343.5 389.8 455.4 504.4 507.6 637.0 679.1 S. Increase in etocka 155.3 172.7 201.4 212.3 233.8 253.2 273.3 2S9.6 307.4 321.4 380.8 537.9 580.2 389.8 Morandum Itsem: F.1. NMt factor incom from abroad 148.4 162.0 201.9 151.7 73.4 187.5 212.8 230.5 229.7 268.8 415.7 564.8 639.0 715.1 2. Net current transfers from abroad 168.2 188.6 209.7 227.8 251.8 279.4 306.3 318.9 333.9 345.6 41S.7 564.8 639.0 715.1 3. Cross national product 155.1 173.0 201.2 212.6 231.4 254.4 276.2 290.0 309.2 322.0 379.8 5S37.9 579.0 651.0 C.1. Gross domestic saving 205.2 230.5 249.2 260.1 295.6 337.6 308.9 341.5 349.4 358.6 511.9 724.0 5686.0 716.2 2. Cross national meving 208.8 226.8 246.8 260.7 299.8 848.4 325.6 365.1 377.3 388.9 562.8 781.4 574.4 716.5 (Guat_' .*k)I 31-Jan-89 Table 1.4 OATEFA - BACE ouFPAT,Ews (US6 Million-) Actual Pro. 1975 1976 1977 1978 1979 1980 1981 1982 1963 1964 1985 196 1987 1988 A.1. Exports of goods A NFS (F08) 783 969 1,S2S 1.281 1.4!O 1,748 1,471 1.288 i,176 1.231 1,162 1,161 1.16 1,263 2. Marchandi.o 641 760 1,162 1,096 1,222 1,520 1.291 1.170 1.092 1.132 1.060 1.044 978 1,105 a. of which: Manufactures 155 179 203 2S0 268 359 325 308 319 330 805 368 - 3. Non-factor service. 142 206 161 18 228 228 180 li 64 99 a*s2 117 159 158 B.1. IPorts of goods A NFS (FOB) 860 1,201 1,424 1,64S 1.784 1,963 2.031 1,629 1.317 1.435 1,262 1,055 1,599 1.746 2. Merchandisa 672 951 1.066 1,282 1,402 1,472 1,540 1,284 1,0568 1.182 1.077 876 1,333 1,477 *. of which: Manufacturee 543 655 14 980 1.061 1,007 1,071 807 656 834 784 753 - - S. Non-fee.or servic.s 168 250 388 S61 382 491 491 345 261 253 185 179 265 269 C.1. RPeource balance (78) (232) (101) (362) (334) (215) (561) (341) (141) (204) (101) 106 (462) (483) 0.1. Not factor incom (66) (44) (27) (18) 3 (71) (103) (121) (113) (203) (186) (199) (172 (164) 2. receipts Factor 15 30 43 73 103 77 55 24 29 30 30 33 31 48 a. of Which labor incooe 0 17 14 22 24 26 24 11 4 3 1 0 0 0 3. Factor payments 81 83 78 91 100 147 158 148 143 232 215 232 203 212 *. of which LT interest 1./ (DRS) 12 1S 20 33 48 so 63 77 89 95 116 208 178 179 E.1. Nat current transfers 78 198 94 116 127 110 91 63 31 29 20 51 70 60 2. Transfer receipt. 69 216 114 139 130 125 97 66 34 32 21 52 72 80 a. of which workers *reittances 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3. Transfer paymante 11 16 21 24 23 16 6 8 4 S 1 1 2 0 F.1. Current account balance (65) (79) (34) (268) (205) (176) (573) (399) (224) (378) (267) (42) (564) (567) i' 0.1. Long-tera capital inflwe 146 84 200 265 242 244 407 380 293 14? 101 184 291 116 2. Nat direct investment 80 13 97 127 117 98 110 78 45 38 61 69 91 90 3. Official capital grant. (1) 1 2 1 0 0 0 0 0 ° 0 48 126 104 4. Nat LT loan- (CRS) SO 48 109 156 184 92 280 279 214 8S 29 5 (147) 43 a. disbursements 72 75 142 203 249 170 344 337 317 254 265 184 171 382 b. repayment. 1./ 23 29 3S 47 68 78 65 59 10 170 235 179 318 339 S. Other loe(nat) LT inf 17 26 (9) (20) (60) 56 17 (7) 34 24 11 62 221 (121) H.j. Other item (Nat) 2./ 23 214 16 69 (64) (387) (182) 22 (40) 249 71 (142) 233 360 I.1. Change in net reserves (-oincrmasa) (104) (220) (182) (88) 27 319 348 28 (29) (18) 95 0 40 91 2. Nt credit from lF 0 0 0 0 0 0 113 0 41 20 (49) (56) (20) 35 3. Other resrve changes (104) (220) (182) (68) 27 319 235 28 (70) (37) 144 56 60 56 Maorandus Items, J.1. Export. of goods (UN Trade System) 623 760 1.160 1.112 161 1,486 1.115 1.120 1,159 1,127 1,107 1.194 - - a. Difference with BOP (S) -2.81 0.01 -0.21 1.31S 5.21 -2.31 -15.81 -4.5S 5.81 -0.41 4.31 12.5S - - 2. Imports of Goods (UN Trade System) 733 838 1,083 1,261 1.362 1.559 2,009 1,388 1,135 1,277 1.175 1,207 - - a. Difference with SOP (S) 8.21 -18.41 -3.21 -1.71 -2.91 5.61 23.4S 7.51 7.01 7.51 8.31 27.4S - - K.1. Holdings of Reserves (IFS IlId) 353 557 753 86s 696 445 1SO 112 210 274 301 362 288 232 I./ On accrual basis. 2./ Includes not S-T, capital n,e.i.. and errors and o.issions. (Quat_al I -k) 31-Jan-89 Table 1.5 QUATBIALA - NATIONAL ACCOUNTSSUMMARY (Mi llion 198 Quetzale_) ActuaI Pr. 1988 1987 1988 1075 1976 1977 1978 1979 198b. 1981 1982 1983 1984 1985 Origin and Use of Rmources 7.879 7,931 7,SS0 7,4S5 7,490 7,448 7.458 7,689 7.32 A.1 CDP at market prices 5,986 6.407 6,907 7,25S 7,594 - - - 2. Net indirect teaom - - - - - ______3. CDP at factor cost ------1.958 1,982 1.922 1,889 1,918 1,926 1,909 1,978 2.038 4. Agriculture 1,673 1,749 1,817 1,874 1.928 1,725 1,625 1.829 1.482 1,464 1.499 1,545 1.612 S. Industry 1,103 1,288 1,442 1,537 1,835 1,783 1,271 1.206 1.182 1.188 1,179 1,187 1,206 a. Manufacturing 904 998 1,105 1,176 1.242 1,312 38 24 27 24 19 16 22 21 - b. Mining and quarrying 5 7 8 12 22 430 393 323 275 269 290 317 - c. Other (by difference) 195 283 330 349 571 383 4,189 4.225 4.103 4,037 4,090 4.058 4,048 4,166 4.312 6. Srv.ices, *tc. 3.189 3,370 3,648 3.841 4,082 (505) (216) (387) (118) 28 (96) 105 9d (286) (315) 8.1. Resource balance (231) (611) (712) (811) 1,748 1.496 1.369 1.220 1,182 1,219 1,048 1,111 1,158 2. Eaports of goode A NfS 1,335 1,423 1,512 1,510 1.643 1.963 1,883 1,488 1,191 1,278 1,114 951 1,398 1,473 3. Iaport of goods A NfS 1.567 2.034 2,224 2,321 2.148 8,100 8.095 8.318 7,768 7.426 7,5d7 7.341 7,359 7,976 8.277 C1. Dom_tic *beorption 6,198 7,018 7,620 8,063 6,843 6,874 6,601 6.457 6,5 6,6,510 6.525 6,881 7,152 0.1. Total consumption, etc 5.208 5,640 6,086 B,372 6.832 6.216 6.220 5,955 S.810 5.894 5,861 5,842 6,158 6,408 2. Prive, *te 4,791 5,178 5,591 6.845 6,072 827 654 646 647 664 649 688 725 743 3. CGenerl government 418 4S4 495 327 560 833 1.095 1,125 989 1,378 1,534 1,692 1,488 1.252 1,444 1,167 969 1,028 832 El. Gros domestic investment I- 1.295 1,398 1,243 898 817 765 795 912 1,025 2. Fiwed inveetment 941 1,291 1.411 1,515 1,437 692 682 524 537 555 576 643 725 a. Pri,et. - - - - 997 771 704 S81 374 279 210 218 270 299 b. Public - - - - 440 525 (44) 48 (76) 72 212 66 39 182 100 3. Incrie. in stocks 49 87 123 177 31 Mesorandum Items (32) (71) (91) (98) (92) (144) (149) (153) (125) (112) C. l. Net factor income from abroad (87) (85) (30) (38) 110 83 aS 26 23 13 37 75 81 2. Net current transfers from abroad 130 2V8 125 141 141 7,809 7,841 7,552 7,362 7,348 7,297 7,303 7,565 7,850 3. Cross national product 5,879 6,322 6,877 7,220 7,563 1,038 924 85S 841 847 743 928 691 717 H1.. Cross domestic soving 869 935 1,381 1,199 1,094 1,075 918 812 775 726 607 812 541 687 2. Croms national ma,ing 912 1,142 1.476 1,307 1,203 1,774 1,748 1.583 1.177 1.064 1,097 1,025 1,046 994 1,065 I1.. Capacity to import 1,446 1,591 2,072 1.828 131 0 (133) (193) (158) (85) (193) (3) (118) (93) 2. Terms of trade adjust_nt 111 167 580 318 7,725 7,879 7,799 7.457 7,299 7.405 7.252 1,454 7.572 7,889 3. Croas domsatic income 6,077 6,575 7,467 7.571 7,809 7,708 7,359 7.20S 7,261 7,103 7,300 7,447 7,757 4. Croam natimnal income 5,990 6.489 7,437 7,538 7.694 (C.at_al lawl) 31-Jan-89 Table 1.6 auAT4mALA - IwPLICIT DaPLATaS (1980=100) ActuaI Pl. 1975 1978 1977 1978 1979 1980 1981 1982 1983 1984 1985 1988 1987 1988 Origin *nd U-e of Resources A.1. CDP at market price. 61.1 68.1 79.3 83.7 90.9 100.0 108.5 113.9 121.4 126.4 150.2 212.4 228.8 257.2 2. Net indirect tes ------3. CDP at factor cost ------4. Agriculture ------5. Industry ------a. Manufacturing ------b. Mining and quarrying ------c. Other (by difference) ------6. Services, etc. ------ 8.1. Terms of Trade (Pa/Pm) 108.3 111.8 137.0 121.1 108.0 100.0 91.1 85.9 87.2 92.8 84.1 99.8 89.4 92.0 2. Exports of goods A NFS 59.3 66.2 88.6 86.3 89.7 100.0 98.3 94.1 96.3 106.3 169.7 242.6 252.6 283.6 3. Imports of goode A NFS 54.8 59.2 64.7 71.3 83.1 100.0 107.9 109.5 110.5 114.5 201.7 243.1 282.S 308.2 C.1. Do_eetic absorption 60.2 67.5 75.1 81.5 90.1 100.0 109.6 114.1 119.5 123.7 148.8 202.1 22b.7 255.9 D.1. Total conauaption 60.3 66.5 74.8 81.2 89.8 100.0 110.7 115.8 122.8 127.1 149.9 205.4 231.0 257.4 2. Private 60.3 66.8 75.1 81.1 90.1 100.0 111.4 117.0 124.5 128.9 153.1 209.8 235.6 261.2 3. Ceneral go.ernment 59.9 64.0 71.6 82.5 87.2 100.0 104.0 104.5 106.4 109.3 119.8 164.4 189.5 221.8 E.1. Cro"- domestic investment 59.3 67.8 71.6 77.6 88.2 100.0 101.6 105.7 103.4 106.6 154.6 196.4 222.0 256.7 2. Fixed in.eatsent 60.7 69.7 73.6 80.4 89.5 100.0 103.4 105.3 105.9 111.7 160.0 200.5 235.7 272.5 a. Private - - - - 85.9 100.0 103.4 111.7 102.5 103.0 167.2 222.9 259.8 306.7 S b. Public - - - - 98.3 100.0 102.9 97.3 110.5 129.1 142.9 143.9 180.5 192.4 3. Increase in stocks 61.4 68.2 79.5 83.9 92.3 100.0 108.0 114.4 121.4 126.9 150.4 212.5 229.2 154.0 Memorandum Itoe: F.1. Net factor incose from abroad 79.1 86.4 107.7 80.9 39.1 100.0 113.5 1U2.9 122.5 143.4 221.7 301.2 340.8 381.4 2. Net current transfer* from abroad 60.2 67.5 75.1 81.5 90.1 100.0 109.6 114.1 119.5 123.7 148.8 202.1 228.7 255.9 3. Cross national product 61.0 68.0 79.1 83.6 91.0 100.0 108.6 114.0 121.5 126.6 149.3 211.4 227.6 255.9 0.1. Cross do_*tic aeving 60.8 68.3 73.8 77.0 87.6 100.0 91.5 101.2 103.5 104.7 251.6 214.5 173.6 212.2 2. Cross national saving 59.9 65.1 70.8 74.8 86.0 100.0 93.4 104.8 108.3 111.6 161.5 224.3 164.9 205.6 (C.._ 11 ..kl) 31-Jan-89 Page 1 of 2 Table 1.7 CUATItALa - EXTgAL DEST, DISlMSBItNTS AND PEPAY4TS (US$ P4iII ion) P,- Actual 1984 1985 1988 1987 1988 1975 1976 1977 1978 1979 1980 1981 1982 1983 DIS BtJiMEW _ 250 260 169 171 382 32 30 62 97 137 138 281 335 316 A. Public & Publicly G.&,. LT 68 254 96 134 125 227 292 145 156 212 145 1. Official Coditor, 28 28 62 56 77 138 69 28 98 12 19 45 74 95 77 99 99 S. multilateral 12 a 5 20 47 39 35 23 20 8 49 17 as of which BRO 7 4 0 0 0 0 0 0 0 0 0 IDA 0 0 0 0 0 *b of ahich 40 1S6 22 40 48 128 192 89 79 74 75 Bilateral 16 9 17 b. 94 48 24 103 128 5 1 0 1 3 13 54 43 171 2. P,i,ate Ceditors 0 0 0 0 0 0 0 0 0 0 0 0 0 0 *. SuppIie*. i. ;03 128 0 1 3 13 S4 43 171 94 48 b. Financial Matk-t- 5 1 5 5 is 0 0 40 45 80 106 112 32 64 3 1 D. P,ivate ion-C.uarantood LT 184 171 382 75 203 249 170 344 337 317 254 265 C. Total LT Diab.roo-.nt (A.8) 72 142 0 60 0 0 0 113 0 41 20 0 0 IW Purchase* 0 0 0 D. (1) 22 8S 47 300 265 - - - - (17) 34 (199) (17) E. Nat Sho,t-Term Capitol 231 471 707 142 203 232 204 258 321 357 296 350 F. Total Diab.raee_nts (C.D.E) 72 75 REPAYMSJ 315 332 11 15 15 23 44 88 117 232 176 Public & Publicly Gusr LT 8 9 8 A. 51 70 83 18O 241 5 4 5 8 11 12 21 34 46 1. Official Creditors 57 77 7 10 12 16 20 26 26 27 35 a aultilateral 3 3 4 14 14 17 22 30 1 1 1 2 2 4 7 8 1. as o wh i ch lBR 0 0 0 0 0 0 0 0 0 0 0 0 ab of wh i ch DA 0 0 25 43 48 123 164 2 1 1 1 1 1 4 14 20 b. L latoral 93 135 91 2 4 3 2 10 39 66 162 2. P,ivat Creditors 3 5 3 0 0 0 0 0 2 2 2 1 1 2 1 0 0 a. Supplier& 135 91 1 3 1 1 10 39 66 162 93 b. Financial Markets 14I 1 4 1 7 62 42 15 18 52 3 3 3 LT 1S 20 25 36 SO S. Pri;ate Non-Cu,anteed 318 339 47 65 76 65 59 103 170 235 179 C. Total LT R.may.nts (A-B) 23 29 33 56 20 25 0 0 0 0 0 0 0 0 0 49 0.D I Repurchaa 0 Item: Mast,andum 14 8 83 62 221 (121) 0 0 0 0 0 0 0 0 Arrear (Flo.a) 167 388 267 0 0 0 0 0 0 14 22 105 Accumulatod Arrmrs 0 0 COMM4TMENTS 19 SO 45 0 0 122 26 41 55 72 0 17 0 0 lBR1Dco.ni taa nto 0 0 0 0 0 0 0 0 0 0 fastODabu,aing 0 0 0 0 of which 0 0 0 0 0 0 0 0 0 0 0 0 IDA cosi,tsent 0 0 1./ On accrual basis. (Cust all *ki) 31-Jan-89 Table 1 .7 (cont): GUATEMALA - ECTE8RNALDEBT INTBERST AG DM Page 2 of 2 Act.u I Pe.. 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1Q8" 1987 1988 INTERST A. Public A Publicly Cuar. LT 7 8 9 16 23 30 38 59 75 84 107 199 170 166 1. Official Creditors 6 7 9 15 22 29 31 4 49 48 53 127 101 115 D. Mtultilateral a 6 6 12 16 20 19 27 31 30 32 49 57 72 na of which IFI 3 3 3 6 8 11 9 14 13 12 11 21 23 29 ab of which IDA 0 0 0 0 0 0 0 0 0 0 0 0 0 0 b. Bilateral 1 2 2 3 6 9 12 17 18 18 21 78 44 43 2. Pri.at. Creditora 1 1 1 1 1 0 7 15 26 38 54 72 69 s0 a. Supplier. 1 1 1 0 0 0 0 0 0 0 0 0 0 0 b. Financial Markets 0 0 0 0 0 0 7 15 26 36 54 72 69 so B. Pri.ate Non-Guaranteed LT 6 7 11 17 26 30 26 18 14 11 9 9 8 7 C. Total LT Interest (A.8) 12 15 20 33 48 60 63 77 89 95 116 208 178 173 D. IW Sor,ice Charges 0 0 0 0 0 0 1 7 7 10 11 9 0 6 E. Intereat Paid on ST Debt 0 0 0 0 0 31 0 16 12 16 19 16 10 16 F. Total Interest Paid (C.O.E) 12 15 20 33 48 91 64 100 107 121 146 233 186 195 DEBrT OUrrSTAQDIC A DISRtSED (DOD) A. Public & Publicly Cuar. LT 147 167 220 307 429 651 809 1.388 1.603 1.931 2.188 2.151 2.064 1.964 1. Official Creditors, 132 156 212 300 423 536 742 1,000 1,099 1.204 1.345 1.481 1,451 1.464 a. Mqulti.lateral 79 95 136 203 287 383 435 514 545 596 707 814 884 905 as of whi ch IUNW 39 42 46 84 108 144 171 186 193 1617 221 277 330 306 ab of which DA 0 0 0 0 0 0 0 0 0 0 0 0 0 0 b. Bilateral 54 61 76 97 136 163 307 466 555 608 638 647 567 559 2. Pri,ate Creditors 14 11 8 7 5 15 67 386 504 728 623 690 613 500 a. Suppliera 9 7 5 4 3 1 0 0 0 0 0 0 0 0 b. Financial MarketelI./ 2./ 6 4 3 3 3 14 67 388 504 728 623 690 613 500 9. P,i,ate Non-Cuaranteed LT 100 12 180 250 312 282 210 168 154 105 108 119 118 109 C. Total LT DOD (A*S) 247 292 400 557 741 833 1.019 1.556 1.757 2,036 2.274 2.270 2,180 2.073 0. Uee of IMF Credit Outstanding 0 0 0 0 0 0 113 113 154 173 125 70 59 94 E. Sh.ort-TermDebt 0 0 255 259 301 333 136 120 119 141 226 253 447 7122 F. Total External Debt (C.D.E) 247 292 655 816 1.042 1.168 1.268 1.789 2.030 2,350 2.624 2.593 2.686 2.879 Memorandum Item: Accumulated Debt Ser,ico Arrears 0 0 0 0 0 0 0 0 14 22 105 167 388 267 DS Arrears (flows) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 '.O. 14.2 8.2 82.6 62.0 221.0 (121.0) StabilIizationBond. (stocks) 0 0 0 0 0 0 0 288 272 468 482 472 450 223 Bonds (flows) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 288.0 (16.0) 196.0 14.0 (10.4) (21.6) (227.0) S on Conceasiomal Ter"s 67.5 66.8 56.9 53.2 47.6 45.5 36.1 28.1 25.6 19.7 19.1 20.3 21.5 - 5 at Variable Interact Rates 3.1 0.9 0.6 0.5 0.3 2.6 8.3 . 9.6 17.3 38.6 37.2 31.4 30.9 - I./ On accrual basis, i a. includ.ng debt &ar 2 / Includes Stabilization Bonda (Bonded Arres (Cuat-all..1,i)31-Jan-89 Table 1.8 WATBIALA - DCTE8NALTRAME Act.,.I Pr.. 1Q75 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1988 1987 1988 EcPcRrS(FOB) ------lil:.ion USI)…------ 502 355 384 Coffee ...... 168 244 526 476 433 464 296 359 351 366 452 71 73 75 84 Banana ...... 35 43 43 48 48 83 79 96 61 se 16 37 Cotton ...... 76 88 155 142 192 166 131 79 46 78 72 24 4 2 51 74 Sugar...... 116 107 85 44 54 69 as 27 127 71 6 421 393 481 526 Other...... 249 278 353 388 495 738 700 610 807 583 1,044 978 1,105 TOTAL...... 641 760 1,162 1,098 1,222 1,52 1,291 1,170 1,092 1,132 1,060 ------(Volume Index 1980.100)…------ 97 103 109 Coffee ...... 106 93 103 103 111 100 88 110 107 102 144 82 92 90 Banana ...... 60 76 72 72 67 100 90 117 64 69 as 23 12 22 Cotton .8...... 0 87 105 105 127 100 70 49 28 89 42 172 134 169 Sugar...... 96 148 144 72 74 100 93 60 210 132 127 75 81 Other...... - - - - - 100 85 80 e1 78 74 67 74 78 TOTAL...... 76 81 87 86 94 100 93 90 so 79 as 70 D9URTS (CIF) ------…------(Million USt)…------ 123 184 206 1 Non Durab lea,...... - - - - 183 104 106 90 r 86 85 35 70 81 Ourablee ...... - - - - 110 241 220 201 1's6 182 152 672 812 Inter-mediat ...... - - - - 483 554 588 476 482 508 479 494 94 105 91 Fuole...... 105 106 148 1S0 239 340 376 301 255 300 262 213 416 428 Capital A Conetruction...... - - - - 489 359 336 320 175 208 197 1,447 1,618 TOTAL...... 733 839 1,053 1,286 1,504 1,598 1,674 1,388 1,135 1,279 1,175 959 …------(Volume Index 1980.100)…------ 107 94 154 143 Non Durab lee ...... - - - - - 100 117 112 90 96 42 52 58 Durablee ...... - - - - - 100 91 84 71 79 66 98 113 Intermediate ...... - - - - - 100 105 87 86 97 90 80 85 99 76 76 Fuelse...... - - - - - 100 99 82 79 94 73 73 Capital & Construction ...... - - - - - 100 107 90 51 60 57 47 79 69 91 97 TOTAL..80...... s 104 113 118 109 100 102 87 73 84 TERMS OF TRADE ItNDEX ------…------(Price Index 1980=100).------ 87 93 Nerchendise Export Price Index 55 61 se 84 85 100 91 85 90 95 82 99 100 104 M-rchendime Import Price Index 57 51 se 68 88 100 103 100 98 96 93 87 114 90 Merchandise Terms of Trade Index 96 121 152 123 99 100 88 85 92 99 Ss as (Cuet_vl1Imk1) 31-Jan-89 Table 1 . 9 GUATEMALA- CONSOLIDATEDNMN FINANCIAL PUBLIC SECTOR Actue i Pro. 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 ,)86 1987 1988 …-…(------l------(million Quetzal**)… A. Total Curr-nt Revenue 424 521 725 821 892 963 974 1,012 984 985 1,182 1,751 2,144 2,649 1. Surplus from Public Enterprise. 1./ SO 41 23 31 36 42 37 82 94 103 121 172 145 233 2. Tanes end Oth,r Revenue& 389 472 695 776 834 892 891 920 877 866 1,032 1,563 1.892 2.304 3. Current Transfera 4 8 8 14 22 30 46 10 13 15 29 16 108 112 8. Total C&rront Expenditure 317 390 479 569 680 790 677 878 878 952 1.036 1,605 1.974 2,397 1. Wages and Salaries 252 300 251 329 390 430 494 489 50. 529 585 789 996 1.169 2. Coode and Services - - 228 129 155 182 212 190 170 195 208 348 452 480 3. Interest Peysnta 24 31 39 sO 57 64 77 100 98 110 110 245 276 426 4. Current Transfers 41 59 63 61 78 94 94 99 107 117 133 222 252 322 C. Current Balance 107 131 246 251 212 173 97 134 107 33 146 147 170 252 D. Capital Revnues 1 7 2 5 4 2 9 16 10 6 S 64 90 45 E. Capital Expanditures 129 288 324 341 433 525 724 546 413 360 301 314 487 576 1. Fixed Capital Formation 99 162 230 278 373 468 682 S10 386 306 259 297 428 S36 2. Other Capital Expenditures 30 126 93 63 60 57 42 SD 26 54 42 17 E9 41 C. Overal l Balance (21) (150) (76) (84) (217) (3SO) (618) (396) (297) (322) (150) (103) (227) (279) 1. Official Capital Crant* 0 1 1 0 0 0 1 1 1 2 1 0 198 194 2. Net Foreign Financing 29 29 60 93 93 94 109 106 124 21 26 68 65 (6) 3. Net Doretic Financing (a) 121 15 (8) 123 255 508 288 172 299 123 35 64 169 4. Other 0 0 0 (0) (0) (0) 0 (0) (0) 0 (0) 0 (101) (78) --- (------(aspercent of GDP)------CO A. Total Current Revenue 11.6 11.9 13.2 13.5 12.9 12.2 11.3 11.6 10.9 10.4 10.6 11.1 12.2 12.9 1. Surplus froe Public Enterprises 1./ 0.8 0.9 0.4 0.5 0.5 0.5 0.4 0.9 1.0 1.1 1.1 1.1 0.8 1.1 2. Taxes and Other Revenue* 10.7 10.8 12.7 12.8 12.1 11.3 10.4 10.D 9.7 9.1 9.2 9.9 10.8 11.3 3. Current Tranefer, 0.1 0.2 0.1 0.2 0.3 0.4 0.5 0.1 0.1 0.2 0.3 0.1 0.6 0.5 8. Total Current Expenditure 8.7 8.9 8.7 9.4 9.8 10.0 10.2 10.1 9.7 10.1 9.3 10.1 11.2 11.7 1. Wages end Salaries 6.9 6.9 4.6 5.4 5.6 5.7 5.7 5.6 6.6 5.6 5.2 5.0 5.7 5.7 2. Coods and Services 0.0 0.0 2.3 2.1 2.3 2.3 2.5 2.2 1.9 2.1 1.9 2.2 2.6 2.3 3. Interest Peyment- 0.7 0.7 0.7 0.8 0.8 0.8 0.9 1.1 :.1 1.2 1.0 1.5 1.6 2.1 4. Current Transfers 1.1 1.3 1.1 1.0 1.1 1.2 1.1 1.1 1.2 1.2 1.2 1.4 1.4 1.6 C. Current Balance 2.9 3.0 4.5 4.1 3.1 2.2 1.1 1.5 1.2 0.3 1.3 0.9 1.0 1.2 D. Capital Revenues 0.0 0.2 0.0 0.1 0.1 0.0 0.1 0.2 0.1 0.1 0.0 0.4 0.5 0.2 E. Capital Expenditures 3.5 6.6 5.9 5.6 6.3 6.7 8.4 6.3 4.6 3.8 2.7 2.0 2.8 2.8 1. Fixed Capital Foration 2.7 3.7 4.2 4.6 5.4 5.9 7.9 5.9 4.3 3.2 2.3 1.9 2.4 2.6 2. Other Capital Expenditures 0.8 2.9 1.7 1.0 0.9 0.7 0.5 0.4 0.3 0.6 0.4 0.1 0.3 0.2 C. Overall Balance -0.6 -3.4 -1.4 -1.4 -3.1 -4.4 -7.2 -4.5 -3.3 -3.4 -1.3 -0.6 -1.3 -1.4 1. Official Capital Crants 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.9 2. Net Foreign Financing 0.8 0.7 1.1 1.5 1.4 1.2 1.3 1.2 1.4 0.2 0.2 0.4 0.4 0.0 3. Net Oocmetic Financing -0.2 2.8 0.3 -0.1 1.8 3.2 5 9 3.3 1.9 3.2 1.1 0.2 0.4 0.8 4. Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.6 -0.4 1./ Surplus of Public Enterprises excluding interaet payants eni tranafn rs. (C.uat_li sk1) 31-Jan-89 Table 1.10 UATBIAL - 4ETARy SUvEv Pro. Actu I 1982 1983 1984 1985 1986 1987 1988 1975 1976 1977 1978 1979 1980 1981 Quot2rlr-)------(End of Period Stock. in Million - 127 72 (222) (460) (334) (224) (305) 295 504 661 733 700 443 A. Foreign An"t (Net) - 2.638 3.010 3,320 3,829 3,560 3,785 597 669 756 920 1,130 1,609 2.260 B. Total Net Oosestic Credit 1.703 1,244 981 - 64 100 339 760 1,061 1,m 1,649 (net) 111 148 87 1. Claie on Government 1.516 1,710 1,907 2.076 2,281 2.751 - 433 504 652 628 999 122 1,388 2. Claim on Private Sector 29 16 37 - 3 I 29 72 21 44 38 Inst. 3 3 3 - 3. Claim on Other Financial 41 39 34 25 21 19 17 s 13 14 26 17 19 4. Other Claims 669 1,347 1,608 1,766 - 594 664 735 753 778 787 834 354 494 - C. Money 1.129 1.404 1.321 1,530 1.848 2,267 2.402 455 5S 656 760 602 940 D. Qusimony 460 544 640 599 600 - 60 68 79 74 130 255 313 E. Long Term Foreign Liabilities 37 174 117 (33a) (1,138) (1.287) - 60 1OO 1SO 220 229 225 205 F. Other Liabilities (Not) 46 Memorandum Item: - 2,191 2,155 2,399 3,193 3,875 4,16 1,052 1,249 1,424 1,537 1,692 1,907 Money plus Qussimoney 809 Qutztale)…------…------(Annual Flows in Million (81) (316) (55) (294) (238) 126 110 108 209 157 72 (33) (257) A. Foreign Auot- (NMt) 225 651 376 374 509 310 (269) 70 72 87 164 211 478 8. Total Met Dometic Credit 327 154 (459) (263) (23) s6 239 421 301 162 (not) (1) 37 (61) 469 1. Claim on Government 166 128 194 198 169 205 47 71 148 176 171 223 2. Claims on Private Sector 24 (6) (9) (13) 22 0 0 11 14 43 (51) Financial Inst. (1) 0 (3) S. Claim on Other 22 (2) (5) (9) (4) (2) 25 (36) 0 11 (8) 2 4. Other Claim 157 25 9 47 36 477 262 48 140 100 70 71 18 C. Money (83) 208 317 420 136 97 105 43 137 189 275 92 103 0 D. Quasi money 125 5a 147 84 96 (41) 29 23 6 11 (5) 56 E. Long Term Foreign Liabilities (20) (31) (57) (455) (800) (149) 9 14 39 51 69 10 (4) F. Other Liabilitios (Net) Memorandum Item: 284 (3Z) 244 794 682 293 243 197 175 114 1SS 214 Money plus Quasisoney 140 (Guasta... I ski) 31-Jan-89 - 130 - Table 1.11 CA.TMswA - SETED ECWiIC INDICATORS Actual Pro. 1976 1976 1977 1976 1979 1980 1981 1982 1988 1984 1986 1988 1987 1908 ANNUALCROVTH RATES (in percent): CDP 1.9 7.4 7.8 6.0 4.7 3.7 0.7 -S.5 -2.6 0.5 -0.6 0.1 3.1 8.6 CDP per capits -0.9 4.4 4.6 2.0 1.8 0.8 -2.2 -6.8 -5.8 -2.4 -8.4 -2.6 0.4 0.8 Consumption 8.5 7.0 7.9 8.1 4.7 5.8 1.8 -2.9 -1.8 1.2 -0.6 1.2 3.7 4.0 Consumption per capits 0.6 4.0 4.9 2.1 1.8 0.9 -1.2 -8.8 -4.0 -1.6 -8.3 -1.8 0.8 1.1 INVESTMENT-SAVINC(me percent of GDP Total Inv1stoent 16.1 21.4 20.0 21.6 18.7 16.9 17.0 14.2 11.1 11.6 11.5 10.3 13.8 14.1 Private 12.6 14.8 14.1 18.0 12.6 9.2 8.6 7.9 6.6 7.8 8.0 8.4 ..1.0 11.3 Public 3.6 6.6 5.9 6.6 8.3 6.7 8.4 8.3 4.6 3.8 2.7 2.0 2.8 2.8 Domestic Saving 14.3 15.4 18.2 15.8 14.2 13.1 10.6 10.2 9.6 9.4 9.9 11.8 7.3 8.0 National Saving 14.6 18.2 19.4 17.3 16.9 13.6 10.4 9.6 8.6 7.6 7.1 9.4 6.9 6.9 Private 11.6 15.2 14.9 13.1 12.8 11.5 9.3 8.0 7.4 7.2 6.8 8.4 4.9 6.7 Public 2.9 3.0 4.6 4.1 8.1 2.2 1.1 1.6 1.2 0.3 1.8 0.9 1.0 1.2 Foreign Saving 1.6 8.2 0.7 4.3 2.8 2.2 6.7 4.6 2.6 4.1 4.4 1.0 7.9 7.2 NON-FINANCIAL PUBLIC SECTOR(am perc Current Rovenums 11.6 11.9 13.2 13.5 12.9 12.2 11.3 11.8 10.9 10.4 10.6 11.1 12.2 12.9 Current Expenditurme 8.7 8.9 8.7 9.4 9.8 10.0 10.2 10.1 9.7 10.1 9.8 10.1 11.2 11.7 Current Balance 2.9 8.0 4.6 4.1 3.1 2.2 1.1 1.8 1.2 0.8 1.3 0.9 1.0 1.2 Capital Revenues 0.0 0.2 0.0 0.1 0.1 0.0 0.1 0.2 0.1 0.1 0.0 0.4 0.5 0.2 Capital Expenditures 3.6 6.6 6.9 6.6 6.8 6.7 8.4 6.3 4.6 8.8 2.7 2.0 2.8 2.8 Overall Balance -0.8 -3.4 -1.4 -1.4 -3.1 -4.4 -7.2 -4.6 -8.8 -8.4 -1.8 -0.6 -1.8 -1.4 Domestic Financing, Net -0.2 2.8 0.3 -0.1 1.8 8.2 6.9 8.8 1.9 8.2 1.1 0.2 0.4 0.8 External Financing, Nat 0.8 0.7 1.1 1.6 1.4 1.2 1.8 1.2 1.4 0.2 0.2 0.4 0.4 0.0 Foreign Crants 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.9 Other Net 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.6 -0.4 Foreign Exchange Losses ------0.7 4.6 1.9 2.0 - BALANCEOF PAYMENTS: Exports of 8WS real groeth rate 8.8 6.6 6.2 -0.1 8.8 6.4 -14.4 -8.5 -10.9 -8.2 8.1 -14.0 6.0 4.2 Imports of GiFS real growth rate -5.0 29.8 9.3 4.4 -7.4 -8.6 -4.1 -21.0 -19.9 7.2 -12.8 -14.7 47.1 5.4 Resource Balmnce/0DP (L) -2.1 -5.8 -1.8 -6.0 -4.8 -2.7 -6.6 -8.9 -1.6 -2.1 -1.0 1.6 -6.5 -6.1 Current Account Balance/0DP (2) -1.8 -1.8 -0.6 -4.4 -8.0 -2.2 -6.7 -4.6 -2.5 -4.0 -2.7 -0.6 -7.9 -7.2 Terms o# Trade Index (1980=100) 108.8 111.8 187.0 121.1 108.0 100.0 91.1 83.9 87.2 92.8 84.1 99.8 89. 4 92.0 EXTERNALDE0T: MLT DOD (US1 million) 247 292 400 667 741 888 1,182 1.669 1,926 2,232 2,604 2,607 2,627 2,434 MLT DOD/CDP (6) 6.8 6.7 7.8 9.2 10.7 10.6 18.1 19.1 21.3 28.6 26.8 34.1 36.9 30.9 MLT Debt Service (5) 4.4 4.4 3.9 8.8 7.8 7.6 8.4 10.8 16.9 21.0 29.5 32.4 42.5 39.1 HLT Interest/Exports. GAS (5) 1.6 1.5 1.5 2.4 8.1 3.3 4.2 6.9 7.4 7.6 9.7 17.4 15.2 13.2 KLT Interost/CDP (7) 0.3 0.3 0.4 0.6 0.7 0.8 0.7 0.9 1.0 1.0 1.2 2.9 2.5 2.2 PRICES AND WAaES: Consumer Prics Index (1980=100) 60.2 66.6 74.8 81.0 90.2 100.0 111.4 111.8 116.8 120.8 143.4 196.4 211.0 234.6 Real Effective Exchange Rate (198 - - - - - 100.0 106.0 112.3 120.9 118.2 77.4 82.7 80.9 86.5 Real Wags Index (1980=100) - - - - - 100.0 117.7 124.8 126.8 114.9 99.2 81.0 - - MONETARYSLPVEY (Annual percentege c Foreign Assets (Not) 67.6 71.0 81.2 10.9 -4.4 -86.7 -71.3 -43.1 -406.9 107.6 -27.3 -3s.0 36.2 - Total Nat Domestic Credit 13.4 12.0 18.0 21.7 22.9 42.3 40.5 16.7 14.2 16.9 8.8 -7.0 6.3 - Claims on Government (not) -1.1 32.8 -41.4 -26.4 56.4 240.0 124.5 39.8 16.2 28.8 9.9 -27.0 -21.1 - Claims on 'rivate Sector 12.1 16.4 29.8 26.9 20.7 22.3 13.5 9.2 12.8 11.6 8.9 9.9 20.6 - Claims on Other Financial Inst. -16.2 6.6 0.0 3.0 885.3 95.8 147.4 -70.9 118.0 -14.2 -28.7 -46.6 136.7 - Money 15.8 89.6 20.8 11.8 10.7 2.4 3.3 1.1 6.0 4.3 64.9 19.5 9.8 - Quasimoney 25.4 22.7 17.4 16.0 8.6 17.1 20.1 24.4 -6.9 16.8 20.7 22.8 6.0 - Lone Term Foreign Liabilities 385.8 68.0 12.9 15.4 -6.0 76.8 96.2 22.8 47.0 18.2 17.7 -6.4 0.0 - Other Liabilities (Net) 26.1 80.7 64.5 60.9 46.2 4.6 -1.8 -9.1 -16.2 -32.6 -888.8 236.8 13.1 - (Cuat_ 1 e.wk1)31-Jan-89 - 131 - Table 1.12 Non Finenciul Public Sector, lqt9 ------…------Pro. Projected Pro. Projected 1988 1989 1990 1991 1988 1989 1990 1991 I-----(million Quetzaelee)…----- 1(ae I of currentQ8P)-J CENTRALGOVERNMET: I. Current Revenues 2,018 2,261 2,418 2,682 10.1 9.8 9.4 9.1 A. Tons* 1,803 1,957 2,075 2,274 8.8 8.5 8.0 7.8 1. Direct 447 55u 618 891 2.2 2.4 2.4 2.4 2. IndIrect 1,386 1.404 1,457 1.583 6.6 6.1 5.6 5 4 a. VAT 494 548 608 676 2.4 2.4 2,41 2.3 b. International Trade 489 476 425 429 2.4 2.1 1,8 1.5 c. other Indirect 373 381 424 475 1.8 1.7 1.6 1.6 B. Oth~er Non Tex Revenue 122 164 185 209 0.6 0.7 0.7 0.7 C. Current Tranefere 142 139 158 l7V 0.7 0.6 0.6 0.6 11. Current Expenditurese 2.082 2,461 2,739 3,045 10.2 10.7 10.6 10.4 A. Consumetiton 1,263 1,441 1,602 1,784 6.2 6.3 6.2 6. 8. Interest, Payment. 305 408 4.9 485 1.5 1.8 1.7 1.7 C. Current Transfer& 514 612 688 776 2.5 2.7 2.7 2.7 111. Current Account (14) (200) (321) (383) -0.1 -0.9 -1.2 -1.3 IV. Cepitaf Revenues 0 0 0 0 0.0 0.0 0.0 0.0 V. capital FExpenditurse 486 811 750 782 2.4 3.5 2.9 2.7 VI. Overall Balence (Deficit) (501) (1.011) (1.071) (1,165) -2.4 -4.4 -4.1 -4.0 A. Orents 194 219 229 229 0.9 1.0 0.9 0.8 8. Net.Esternel Flnenciong1.1 21 383 275 292 0.1 1.7 1.1 1.0 C. Net Domestic Financing 177 6l 68 77 0.9 0.3 0.3 0.3 0. Other 109 349 499 587 0.5 1.5 1.9 1.9 NON4FINANCIAL. PUBLIC SeCTOR (CONSOLIDATED) I. Current Revenues 2,649 8,019 3,198 3.564 12.9 13.1 12.4 12.2 A. Operating Surplue of Public Enterprises (etc. in. A t oen.) 233 846 326 400 1.1 1.5 1.3 1.4 B. Te..* 1.849 1,997 2.116 2.317 9.0 8.7 8.2 7.9 C. Other Non To. Revenue 455 546 612 6e8 2.2 2.4 2.4 2.4 0. Current Transfer* 112 130 143 159 0.5 0.6 0.6 0.5 II. Current Eupendituren 2,397 2,882 3,214 3,568 11.7 12.5 12.4 12.2 A. Consumption 1,649 1.863 2.062 2.285 8.1 8.1 8.0 7.8 S. Interest Payments 426 517 574 632 2.1 2 3 2.2 2.2 C. Current Trenefe,e 322 502 579 652 1.6 2.2 2 2 2 2 III. Current Account 252 136 (16) (5) 1 2 0 6 -0 1 0 0 TV. Capitol Re.enuee 45 30 30 30 0.2 0 1 0 1 0 1 V Capital EuPenditures 576 1.023 1,216 1.331 2.8 4 4 4 7 4 6 VI. Overall Balance (Deficit) (279) (857) (1.202) (1.306) -1.4 -3.7 -4 7 -4 5 A. Grant. 194 219 229 229 0.9 1 0 0.9 0.8 B. Net E.uternelFinancing I./ (6) 392 4.53 543 0.0 1.7 1.8 1.9 C. Not DomneeticFinancing 169 60 67 77 0.8 0.3 0.3 0.3 0. Other (78) 186 453 457 ..0.4 0.8 1.8 1.6 J./ Include. balance of paymento nupport. Source: Ministry of Finance o., orld Bank estimate.. Table 2.1 Cuattoals - Public Sector Invu-at_nt Progrvm (Million Qustzalea) l…Eatimtd-----I I------Programed ------Sourc. of 1988 1989 1990 1991 External ------TOTALS ------Financing Local Eat. Total Local T Eat. Total Local Ext. Total Local Eat Total Local E.t otal EDUCATIONt (Ministry of Education) ______Planning and Programing IBM - 2328 - 0.2 0.2 - 2.0 2.0 - Cenalte. (urban pri_mry project) - 0.0 - - 0.0 C.0 2.2 2.2 Ilo - 2228 0.1 1.4 1.5 0.5 6.1 6.6 Rural 0.3 2.4 2.7 - - 0 0 0 a 9 9 10.8 Pri_mry (PRODMERIR) IOB - 707SF 0.1 1.1 1.2 0.9 8.9 9.8 0.5 2.3 2.8 - - 0 0 1.5 12.3 13.8 (Miniatry of Public Works) ______ Construction of Pro-primry School - 0.1 - 0.1 1.0 - 1.0 0.9 - 0.9 0.9 Const. Urban Primry School (Vorginal Aras) - 0 9 2 9 0.0 2.9 I8RD - 2328 0.3 0.7 1.0 1.2 2.3 3.5 1.0 Const. Other Urban Primry Schools 2.5 3.5 - - 0.0 2.5 5.5 8.0 - 1.5 - 1.5 4.1 - 4.1 2.6 Conat. Rural Primry Schools - 2.6 2.6 - 2 6 10 8 0.0 10.8 MO8- 707SF 1.0 5.0 6.0 0.5 3.1 3.6 - Const. Rural Primry Schools - 0.0 - - 0 0 1.5 8a1 9 6 USAID - Crnt - 6.6 6.6 4 2.1 6.6 Conat. of Middle Shool- - 6.5 6.5 - 6.5 6.5 4.5 21.7 26.2 - - - 0.0 1., - 1.7 Const. of Other Shools 2.7 - 2.7 2 8 - 2 8 7.2 0 0 7.2 - - - 0.0 0.6 - 0.6 Construction Management - - 0.0 * - 0.0 0.6 0.0 0.6 (Schools) - _ _ 0.0 2.4 - 2.4 1.6 - 1.6 1.6 - 1.6 5.6 0 0 5.6 %saic Education (Educacion Minim) 1BM - Appro-ed - - 0.0 - - 0.0 0.8 8.5 9.3 6 0 20 7 26 7 6 8 29.2 36 0 TOTAL: Education Sector 3.2 15.0 18.1 17.4 24.5 41.9 10.4 22.2 32.6 13.9 27.2 41.1 44.8 t8.9 133.7 (gua.Park skI) 15-Feb-89 Table 2.2 Cuat-'la - P 'ic. sector I.et-. Progra. (94 i ;or,QuetzalIaa) I I----Eatiatad--- II------Programmed------1990 1992 TOTAL-S Sour,ceof 1986 1989 ------E.te-,al -- - …--…-----…------Local Eaxt. Total LocalI Eat 'tota'I LoaI Eat Total Financing Local Ext. 7otal Local Eat. Total HEALTH (Ministry of Health) 3.7 3.9 - 3.9 13.0 0.0 13.0 .8 - 1.8 3.6 - 3.6 3.7 - EQuipping of Health Cent.ers and Post. - 0.0 33.0 33.0 7.0 - 8.3 8.3r - 8.5 8.8 - 9.0 9.0 Infant Sur"ival USAID - Grant - 7.0 Immni.zation and 0.0 - 11.0 11.0 - 11.0 11.0 0 0 22.0 22.0 Italy - Proposed - - 0.0 - - Expansion of Rural Primery Cars - 3.0 3.0 - 3.0 3.0 0.0 6.0 8.0 ISAZD - Proposed - - 0.0 - - 0.0 Health Education - 0.0 - - 0 0 0.0 1.2 1.2 France - 1.2 1.2 - - 0.0 - Hespital Equipment (Rcieasvelt) - - 0.0 1- 0 24.0 24.0 - 13.8 15.8 - 8.2 8.2 - - 0.0 Hospital Equpjpesnt (Quezaltenango) France (Ministry of Public Vorks-kWEPSA) - - 0.0 - - 0.0 13.3 41.3 54.6 MO8 - 623SF 6.6 11.9 18.5 6.7 29.4 36.1 Conatruction and ftintemanca of M.ospitals - - 0.0 0.0 4.1 4.1 - - 0.0 - 4.2 4.1 - - 0.0 Conatruction and He1intanance, of Hoapitals USAI0-Crant-Propo.ed 2.1 8.8 10.9 3.4 4.1 1.4 5.4 6.8 - - 0.0 - - 0.0 of flinics and Haalth Poste MD6 - 623SF 0.7 0.0 1.2 1.2 Conatruction - 1.2 1.2 - - 0.0 - - 0.0 Health posts LESAID-Crant-Propcoad - - 0.0 Conatruction of Clinics and - - 0.0 - - 0 0 0.2 0.0 0.2 - 0.2 - 0.2 - - 0.0 Specialized Medical Care - 0 0 2.9 0.0 2.9 - 1.9 1.0 - 1.0 - - 0.0 - Supervision and 041nalgesentof Construction - 1.9 (General Di recterate-#OPT) 0.5 - 0.5 0.5 - 0.5 1.5 0.0 1.5 - 0.3 - 0.3 0.2 - 0.2 ARepair and Eapansion of Mospitals - - 0.0 - - 0.0 0.1 0.0 0.1 - 0.1 - 0.1 - - 0.0 Repair Regional Hoepitel de Langerud - - 0.0 0.6 0.0 0.6 0.3 - 0.3 0.3 - 0.3 - - 0.0 Reconetruction Reh~abilitation Certer - 2.7 9 6 1.6 11.2 1.1 1.6 2.7 3.1 - 3.1 2.7 2.7 2.7 Ccnat. and Repair Health Centers & posts USAID - rant - 10.0 43.1 0.0 4.3.1 - 13.1 10.0 - 10.0 10.0 - 10.0 10.0 Construction and Repair of Health Facilities - 1.3.1 23.0 40.1 86 4 143.2 229.6 26.1 40.9 67.0 26.3 56.8 83.1 16.9 22.5 39.4 17.1 TOYTAL: Healtill Swctor (gua._park .wkI) 13-Feb-89 QuaemcSeto Ia I.esmet-Pu Ii Poq..Page 1 of 2 Table 2*3 -u-t-ala---Pub!----- Seto Invest--e-t Program- (MillI ion QuatzelIes) I-Estimated-II … - … ------~~Programe,d------I Source of 1988 1989 1990 1991 TOTALS External……------T Financing Local Ext. Total Local Eat. Total Local Ext. Total Local Ext. otal Local Ext. Total AORICULTLRtE (Ministry of Agriculture) Mini Irrigation (Altiplano) USAID - Grant - 11.3 11.3 0.3 0.6 0.9 - - 0.0 - - 0.0 0 3 11 9 12.2 Sal I Scale Irrigation USAID - Zrant - 9.3 9.3 - 7.0 7.0 - 6.9 6.9 - 6.2 6 2 0 0 29.4 29.4 Mini Irrigation Italy - Grant - 8.6 8.6 - 10.3 10.3 - 10.3 10.3 - 10.3 10 3 0.0 39.5 39.5 Marketing Studies Mini Irrigation USArD - Grant - 0.9 0.9 - 0.2 0.2 - 0.2 0.2 - 0.2 0.2 0 0 1.5 1.5 Well Drilling-Altiplano USAID - Grant - 2.0 2.0 - 10.0 10.0 - 4.8 4.8 - 2 0 2 0 0.0 188 18.8 Feasibility Studies-Irrigation USAID - Grant - 3.4 3 4 1.1 - 1.1 2.2 - 2.2 2 9 - 2 9 6.2 3 4 9.6 Irrigation Guetalon Ri, Bravo LSAID - Grant - 1.2 1.1 - 1.7 1.7 - - 0.0 - - 0c0 0 0 2 8 2.8 Irrigation Nuteva Concepcion Italy - Grant - - 0.0 - 8.7 8.7 - 6.0 6.0 - 6.0 & 0 0.0 20 7 20.7 Irrigation Nueva Concepcion ISAID - Grant - - 0.0 - 4.3 4.3 - 4.0 4.0 - 4.0 4 0 0 0 12 3 12.3 Seed Production USAID - Grant - - 0.0 - 0.1 0.1 - 0.2 0.2 - 0.2 0.2 0 0 0 5 0.5 Sel P1arser Davelopsent (rice) Italy - Grant - - 0.0 - 1.0 1.0 - - 0.0 - - 0.0 0.0 1.0 1.0 Agriculture Planning Posect Develp. LJSAID-CGrant - 2 4 2.4 - 0.8 0.8 - 1.0 1.0 - 1.0 1 0 0.0 5.2 5.2 Livestock D-eveopeent USAID - 520-T-034 - 1.9 1.9 - - 0.0 - - 0.0 - - 0 0 0 0 1.9 1.9 An.esl Healtht IDS -E67SF - 7.8 7.8 1.6 2.9 4.5 - - 0 0 - - 0 0 1.6 10 7 12.3 Other Livestock Development Italy - Grant - 1.2 1.2 0.3 2.2 2.5 - - 0.0 - - 0 0 0 3 3 4 3 7 Transfer of Technology-Livestock IDB - 4730C - 1 0 1.0 - 1.1 1.1 - 1.2 1.2 - 0.8 0 6 0 0 3.9 3 9 Transfer of Technology-Livestock LISAID- Grant - 0.4 0 4 - 0.8 0.8 - 0.5 0.5 - 0.2 0.2 0i 0 2 0 2.0 Transfer of Technology-Livestock IPFAD 154-0.) - 0.3 0.3 - 0.8 0.8 - 0.4 0.4 - 0.2 0.2 0 0 1 6 1.6 Protection of Water Scurcam UISAID- Gran,t - - 0.0 - 1.2 1.2 - 1.2 1.2 - 1 5 1.5 0 0 3.9 3.9 Reforestation for Commercial Use UISAID- Grant - - 0.0 - 8.5 6.5 - 7.0 7.0 - 7.5 7.5 0.0 21.0 21.0 Other Reforestation USArD - 520-T-037 - 1.2 1.2 1.5 0.6 2.1 1.5 0.6 2.1 1 5 0.6 2 1 4.5 3 0 7.5 - Tree Nurseries USAID -GCrnt - - 0.0 - 2.4 2.4 - 2.5 2.5 - 2.5 2 5 0 0 7 4 7 4 . Other Conservation Works -- - 0 0 1.1 - 1.1 1.2 - 1.2 1.2 - 1.2 3.5 0 0 3.5 D Other USArD - Grant 0.5 0.8 1.1 0.6 0.6 1.1 0.5 0.7 1.2 0 5 0.7 1.2 2 0 2 6 4.6 (INTA) Land Development - .8 - 1.8 1.8 - 1.8 1.9 - 1.9 2.0 - 2.0 7 5 0 0 7.5 (ICTA) Trans,lferTechnology-PROGETTAPS 10D 473CC 1/ 0.1 1.2 1.3 1.5 2.4 3.9 3 0 7.0 10.0 2 0 5.0 7.0 6.6 15 6 22.2 Other (ICTA)- 0.2 - 0.2 0.2 - 0.2 0.2 - 0.2 0.3 - 0.3 0.9 0.0 0.9 (ItLAFDR) Reforestation UJSAID- 520-T-037 2/ - 0.8 0.8 - - 0.0 - - 0.0 - - 0.0 0.0 0.8 0.8 (New Projects) Montufar Irrigation Italy - proposed - - 0.0 - 9.0 9.0 - 20.1 20.1 - 10.4 10 4 0.0 39.5 39.5 Chi.oy Reforestation IDB - Proposed - - 0.0 - - 0.0 - - 0.0 1.8 6.0 7.8 1.8 6.0 7.8 Irrigation II ID8 - Approved - - 0.0 0.5 1.0 1.5 0.9 2.9 3.8 1 8 6.0 7.8 3.2 9.9 13.1 Marketing Support (INDECA) Italy - Proposed - - 0.0 - 7.4 7.4 - 9.2 9.2 - 11.3 11.3 0.0 27 9 27.9 lacapa/Chiquinula Rural Developeent IPAD/Netherl.-Prop. - - 0.0 - - 0.0 0.5 2.5 3.0 1 0 5.0 6.0 1.5 7 5 9.0 SLMBTOTAL: Investment 2.6 55.4 58.0 10.4 83.6 94.0 11.9 89.2 101.1 15.0 87.4 102.4 39.9 315.6 385.5 (guprr.wl)15-Feb-89 2 of 2 Table 2.3 CuGt 1-a Public Sector lnet.eetnt P,oar Page (., ll; on Quetza l*&) ------Eatimated--_-_ l l ------Prograemed 1990 1991 rOTALS Source of 1988 1989 Eat rnsa I ______T Total Local Ext. otal Local E.t Total .Ocai E-t Financing Local E.t. Total Local Eat. Total Credit (7ANDEiA - Financial Assistance) ______20.5 3 5 24 C 76 5 12 0 87.5 18.5 2.0 20.5 18.5 2.5 21.0 19.0 3.0 22.0 Ser,icee USAID 24.5 3.5 28 0 86.3 10.5 96.8 Technical 19.9 2.0 21.9 19.9 2.0 21.9 22.0 a.0 25.0 Credit for Basic Grain* USIA 10.5 5 0 15 f1 4C 8 17 4 58.2 10.0 3.9 13.9 10.0 4.0 14.0 10.3 4.5 14.8 Credit for Miscellaneous Crops USAX 11.4 0.6 12 C 41.0 1.6 42.6 9.4 0.2 9.6 n.6 0.4 10.0 10.6 0.4 11.0 Credit for Li,estock LSAID 3 ( 12.0 lf C 9 9 27 9 39.8 1.9 1.9 3.8 2.0 14.0 16 0 3.0 2.0 5.0 Credit for Irrigation LSAWD (Banco d. Guatem la) S8.9 10 0 28 8 38 8 40 1 108 0 148.1 - 10.8 10.8 13.7 25.9 39.6 16.4 42.5 Agriculture Cred.t ID8 - 5290C he Projects (Credit) 7.5 4.5 15 0 19).S e 2 20 8 27.0 - - 0.0 - - 0.0 1.7 5.8 Small and Medium Farmer Credit ID9 - Proposed 84 4 68 4 152 e 300.8 199.2 500.0 59.7 20.8 80.5 73.7 48.8 122.5 83.0 61.2 144.2 SLUrr0TAL: Credit 245 3 99 4 155 8 255.2 7 * 7 514 8 855.5 62.3 76 2 138.5 84.1 132 4 216.5 94.9 150 4 TUTAL: Agriculture Sector ------project ;a ncluded 1/ Additional MO8 end IFAD financing for technology transfer *hich Q3.' miilion in the administ-ati,e budget for the Ministry and ICTA, of in 1988. was budgeted for ICTA and Q7.0 million for the Min.stry U1 as new Directorate of Forestry. 2/ During 1988 INAFOR>incorporated nto Ministry of Agriculture (gum_parkl.kl) 1S-Feb-89 Table 2.4 CuatesalIt - Plublic Sector Investment Program Page 1 of 2 (M ilIonm QuetzalIaa) I---Estimated------Programed ------I Source of 1958 1989 1990 1992 TOTALS ------External ------…------T Local E.t Total Financing Local Ext. Total Local Ext. Total Local E-t. otal Local Ext. Total Road Sulisector (Ministry of Public Works) Construction/Rehabilitation of Main Roads 2 4 8.1 5.3 3.0 8.3 16 6 9.7 26.3 WideniingCA-i-Don Juato CADET - 184 0.4 1.4 1.8 5.2 2.9 8.1 5.7 25.7 5.2 15.7 20.9 6.5 17 7 24.2 16 8 54.5 71.3 Reconstruction CA-9-Ric Hiondo Twe - 168 0.5 - 0.5 4.6 21.1 0.0 - - 0 C' 4 9 3.5 8.4 Conat. Escuintla-Puerta Quetzal ISAlD-Orant-Proposed 0.9 - 0.9 4.0 3.5 7.5 - - 0.3 2.2 2.5 - - 0 C' I 5 6 3 7.8 Rahab./Constr. Rural Roads-Tv. CA-1 Trpals MOB - 216 0.3 0.2 0.5 0.9 3.9 4.8 0 0.9 - 0.9 0.6 - 0 6 2 6 0.0 2.6 Rahab./Constr. Rural Roads-TV. CA-I Prsijanes - 0.3 - 0.5 0.8 - a 7.1 0.3 2.6 2.9 - - 0 C' 1 3 5 9 10.2 Rehab./Conatr. Rural Rtoads-TV.CA-S Moyuta MOe - 216 - 0.2 0.2 1.0 6.1 0.0 - - 0 0 0 5 3.5 4 0 Reh./Cons. Rural Roads-IV, Quetzalt.-San Juan MDB - 216 0.3 0.1 0.4 0.2 3.4 3.6 - - 0 0.2 1.2 1.4 - - 0 0 0 5 7.8 8.3 Reb./C-n Rural Roads-TV, Quetxalt.-San Carl"s MSB - 216 - 1.9 1.9 0.3 4.7 5 0.0 - - 0 0 1.2 0 0 1.2 Bridge Conat. La liss, Cabuz TV - 1.0 - 1.0 0.2 - 0.2 - - 1.1 1.1 - 1.1 1.2 - 1.2 3 4 0 0 3.4 Tourism Access Roads - - - 0.0 1.1 - 9 0.4 2.1 2.5 0 3 1 9 2.2 1 3 5.5 7.8 Rehabilitation CA-9 El Rancho-Rio Hiondo CASE! 0.2 - 0.2 0 4 2.5 2 3.2 3 7 0 4 2.3 2.7 0.3 1 4 1 7 1 4 6 9 8.3 Rehabilitation CA-2 Taxisco-de Alvarado CASBO 0.2 - 0.2 0.5 0.5 1.1 5.9 - 5.9 5.6 - 5 6 12.1 0.5 12.6 Isprovesant Los Encuentroa-Quiche LGAID-Orant-Prcposed - - 0.0 0.6 - 0.0 - - 0 0 0 5 0 6 1.1 Construction, M.chaquil Bridge USAID-Crant-Proposed 0.1 - 0.1 0 4 0.6 1.0 - Construction/Rehabilitation of Secondary Roads 0.5 0.5 - 0.S 0.5 - 0 5 I B 0.0 1.8 Pre-fab-ication bridge ,oinonsnts 0.3 - 0.3 0.5 - 0.0 - - 0 0 1.2 00c *-2 Const. Castilo-San Juan Datuncalco- 0.2 - 0.2 1.0 - 1.0 - - 0.5 3.8 4.3 0.5 3.0 3.3 - - 0.0 1 1 6.8 7.9 0 Reha CA-i - Sarberena El Molino CASBO 0 1 - 0.1 0.8 1.4 - - 0.0 - - 0 0 1.1 0 8 1.9 Construction Sassyac - San Pablo UJSAD-Crant-Propcsed 0.5 - 0.5 0.6 0.0 - - 0 0 0 5 0 3 0.9 Construction,Chicacco-San Pedro Cutzan USAID-Crant-Proposed 0.1 - 0.1 0.5 0.3 0.8 - - 0.5 - 0.3 0.5 - 0.5 1 0 0 0 1.0 Construction Modular Wooden Bridges - - - 0.0 - - 0 0 0.9 - 0.9 0 9 - 0.9 3 0 0.0 3.0 Access Roads-Quiche - 0.6 - 0.6 0.6 - 0.8 3.7 - 3.7 - - 0 0 4.0 0 0 4.0 Ruta 16. Palencis-S.Joee Pinula - 0.3 - 0.3 - - 0.0 2.7 - 2 7 - - 0.0 3.0 0.0 3.0 CA-i Zaragoza-Comsalapa - 0.3 - 0.3 - - 0 0 0.0 - - 0.0 1 4 1.2 2.6 Construction San Miguel Nanan USAIf-Crant-Proposed 0.2 - 0.2 1.2 1.2 2.4 - - 1 0 - - 0 0 - - 0 0 1 0 0.0 1.0 Construction Lak. Atiian Road -- - 0.0 1.0 - 2.1 6 0 5 9 10 9 16.8 5 0 14.8 22.8 Secondary Road Rehabilitation IBR - Approved - - 0.0 - - 0.0 3.9 Co,nstruction/laprovesent of Rural Access Roads. 10.9 10.9 - - 0.0 8 5 30.2 39.0 Construction Rural Access-Labor Intensive UISArD- 520-T-040 8.8 6.5 15 3 - 12.8 12.8 - 10.5 - - 0.0 - - 0.0 0 0 10.6 10.6 Construction Rural Access-Labor Intensive USAID - Crant- - 0.0 - 10 6 2 4 1.6 - 1.6 1.6 - 1.6 7.1 0 0 7.1 Corxstr.fImpro-.Access Roads Ixil/Uspatan- 1.5 - 1.5 2.4 - 0.6 1.6 2.2 2.3 - 2.3 3 6 9.9 13.5 Maintenanca Rural Access Roads-Labor Intensive LEAID - 520-T-037 0.7 3.8 4.5 - 4.5 4.5 0.9 3.4 4 3, 0.8 3.0 3.8 4 0 13.3 17.3 Rural Access Roads-Part TV MS5 - 797 1.4 3.5 4.9 0.9 3.4 4.3 6.0 - 6.0 6.0 - 6.0 13.5 3.0 18.5 Rural Access Rdoad UZAID-rant-Propoaed 2.0 - 2.0 1.5 3.0 4.5 Rehabilitation - Improvement of Roads 4.0 6.6 2.4 - 2.4 2.8 - 2.8 10 3 4. 1 14.3 Paved UJSAID - Crant 2.3 - 2.3 2.8 1.0 1.0 - 1.0 1.2 - 1.2 4 0 0.ij 4 0 Earth~ 0.6 - 0.8 1.0 - Supervision and Technical Siervices and Training and Road Inventory 1.0 - 1.0 1.0 - 1.0 1.0 - 1 0 3.2 0 0 3.2 Supero /Tech. Serv fTraining and Road Inventory - 0.2 - 0.2 (gus_parIk.ski) 15-Feb-89 Table 2 . 4 Custemala- Public Sector Inmestment P,og,am, Page 2 of 2 (Mi I'mon Qu-ta .-- ) I-----Esteated----- I1------Programmed ------I Soure* of 1988 1989 1990 1991 TOTALS Eat-rnal…- T__-LS T F;nancing Local Ext. Total Locrt Eat. Total Local Eat Total Local E.t. Total Loca Ert otal (Miniatry of Doeelop-ent) Rural Acea Road- - 0.9 - 0.9 1.2 - 1.2 1.1 - 1.1 1.1 - 1.1 4.3 0.0 4.3 Br.dges - 06 - 0.6 1.4 - 1.4 1.0 - 1.0 1.0 - I0 4 0 0 0 4.0 (INTA) Constr. of Secondary and Rural Areas Roads USAID - Crant 0.8 0.9 1.7 0.8 1.0 1.8 0.9 1.0 1.9 ( 4 0.8 1.2 2 9l 3.7 6.6 (Ne- Projsocts - Road-) Autopist. Pal.n-Escuntla Italy - Proposed - - 0 0 1.5 5 0 6.5 4.8 11.1 15 9 4 8 11.1 15 9 11.1 27.2 38 3 Con-t Modesto Mendn± Poptun Germany - Proposed - - 0.0 - - 0 0 2.4 5.6 8.0 3.5 8 3 11 8 5 0 13 9 19.8 Rural Acces Road.-Alt. Verapez (labor intens ) Germany - Propoped - - 0.0 0.7 4.1 4.8 0.5 4.1 4.6 0.5 4.1 4 6 1.7 12.3 14.0 SUBTOTAL Road- 26.8 18.5 45.3 41 3 106.9 148.2 5S.S 73.1 128.6 54.6 62.2 116 8 178.2 260 7 438.9 Ports Subesetor (Port of Santo Tosas de Crst, IIa) Purchase of Equip . repair and impro-. of Port - - - 0 0 5.5 - 5.5 6.0 - 6.0 6.9 - 6 9 18 4 0 0 18 4 (Port of Quetzal) Purchase of Equip., repair end impro-. of Port France 3.1 5.7 8 8 - 4.7 4.7 - - 0.0 - - 0.0 3.1 10 4 13.5 (Port of Chmper ico) Rehab.lhtatton _ 0.0 1.0 - 1.0 - - 0.0 - - 0 0 1.0 0.0 1.0 I (New Projects Ports) Iapro,oment of Santo Tomes de Casti Il not determined - - 0.0 - - 0.0 - 16.6 16.6 - 10.0 10.0 0 0 26 6 26.6 SUBTOTAL: Ports 3.1 5.7 8.8 6.5 4.7 11.2 6.0 16.6 22.6 6.9 10.0 16.9 22.5 37 0 59.5 A iati on Subeector (Ministry of Public Works) Air Nanigat.on Equipment France 0.7 2.8 3.5 1.4 7.9 9.3 1.4 7.9 9.3 1.4 7.9 9.3 4.9 26.5 31.4 Repair Aurora Terminal _ 0.2 - 0.1 0.5 _ 0.5 0.5 - 0.5 0.5 - 0.5 1.6 0.0 1.6 Drainage and Improosment Peten - 0.4 - 0.4 - - 0.0 - - 0.0 - - 0.0 0. 0.0 0.4 Rep,ae Runway-Aurora _ 2.5 - 2.5 0.7 0.7 - - 0.0 - - 0.0 3.2 0 0 3.2 SUBTOTAL: A,iation 3.7 2.8 6.5 2.6 7.9 10.5 1.9 7.9 9.8 1 9 7.9 9.8 10.1 26.5 36.6 TOTAL: Transport Sector 33.6 27.0 60.6 50 4 119.5 169.9 63.4 97.6 161.0 63.4 80.1 143.5 210.8 324.2 535.0 (gu_vpark,wk1) 15-Feb-89 Table2.5 Gu teastsI - Public Sector In,estworlt lP-ogrvm (";I 1.mn Qsuetelsa) I----Estimated----I ------Programmd ------I Sourc. of i988 1989 1990 1991 TCTALS Eaxternal------T T Financing Local Est Total Local Est otal Local Est. Total Local Est Total Local Est ctal WATER 5lPPLIISerTOR (Ministry of PabI,c Works) Xa.ra-Piecays-StageII US~AW - Crant 7.4 - 7.4 8.6 8.6 7.2 - - 0.0 - - 0.0 11.0 3.6 14.6 Othe,e Vote, Suoely/Sanitation USAD - Grant 0.7 - 0.7 1.9 0.3 2.2 1.2 - 2.2 1.2 - 1.2 5.0 0.3 5.3 (Ministry of Health) MEPAR - Adm.,s.tr*t;om/Teel.;csl Serc.cea MD6 - 719SF 1.2 1.5 2.7 1.5 1.8 3.3 1.8 1.5 3.3 - - 0 0 4.5 4 6 9.3 LNEPMR- Co.str.ctio,l Rural Wote, Supply 10B - 719SF 0.3 23.7 24.0 2 7 17.8 20.5 - - 0.0 - - 0 0 3 C' 41 5 44 5 LNjPAR - ConstructionlRural Weter Supply USAID - Grant - 1.5 1.5 - 1.9 1.9 - 1.9 1 9 - - 0 0 0 0 5 3 5.3 UNEPAR - Rural Water Su,pply Germany - KFW - - 0.0 1 0 4.5 5.5 1.0 7.5 8.5 1.0 7 5 8 S 3 0 19 S 22.5 UIEPAR - Rural l.'ate r-Spply, paten MSAID -Grant 0.1 0.5 0.6 0.2 0.7 0.9 0.2 0.7 0.9 0.2 0 7 0 9 0 7 2 6 3.3 DSA- Rural Water Supply USAID- 520.-U-033A - 4.6 4 6 - 4.9 4.9 - 0.0 - - 0 0 0 0 9 5 9 5 D54A Rural Water Supply UJSAID Crant - 4 6 4 6 - 4 9 4.9 - - 0.0 - - 0 0 0 0 9.5 9.5 0DSA R.ral Sanatation USAMC 520-U-033A - 0.5 0.5 - 0.5 0.5- 0.8 0.8 - - 0 0 0.0 1 6 1 6 DSA- Rural San,tat.on USAID- Grant. - 0.5 0.5 - 1 0 1.0 - 0.6 0.6 - - 0 0 0 0 2 1 2 1 (M,ratry of De.olopeent) R.ral water Supply 1 7 - 1 7 1.8 - 18 19 - 1 9 2.0 - 2.0 7 4 0 0 7 4 Rural Son.tatla. 0.2 - 0.2 0.2 - 0.2 0.3 - 0.3 0.3 - 0.3 1 0 0 0 1 0 .ater SuPPlyfSae.erag -n Sacondory C.t-.a IDS 671SF 1 6 3 8 5 4 1 0 6 5 7.5 1.0 6 5 7.5 - - 0. 68 2 (EWA3JU) Water Supply Rehab.l,tot,on IBRD 2759 - - 0 0 1.5 5.3 68a 2.9 9.9 1.2.8 3.5 1.2.0 15.5 79Q 27 2 35 1 Puap.ng Stat'on Imoronerant CABEI 0 4 2.2 2 6 - - 0.0 - - 0.0 - - 0 0 0 4 2.2 2 6 D0lstrbut,on Study France - I18 16a - 1 6 1.8 - - 0.0 - - 0.0 0 0 3.6 3 6 (New Projecto) Sth Water Supply/Sewerage Sec C.t.es (INFON) IDS - Proposed - 0 0 - - 0 0 1 0 4 0 5.0 10 0 30.0 40.0 11 0 34 0 45 0 Well 0rH1-9 (EMPAGUA) leper - P-opoaed - - 0 0 - - 0.0 2.0 6.4 8 4 2.8 8 4 11.2 48P 14 8 19.6 Rural Water Supply (US) USAXD - Propoaed- - 0.0 - - 0.0 - 9.0 9.0 - 9.5 9.5 0.0 18.5 16.5 Rural Water Sujpply (VNREPAR) 1DB - Proposed - 0.0 - - 0.0 1.0 7.5 8.5 5.0 20.0 25.0 6 0 '27 5 33.5 TOTAL, Water Swpply Sector 13 6 43.0 58 6 15.4 5-k5 70.9 14.3 56.1 70 4 26.0 as81 114.1 69.3 2447 314.0 (gu.._pa,k.wkl) 15-Feb-89 Table 2.6 "Ust""l- - PUbl c S.CtOr I'est"nt Program (millII on Qu.tzalaa) l-----Et-td--l 1---I- - Programd ------1 SoUrce of 1988 1989 1990 1991 TOTALS Eat-rn )… ------_------_- ______…-----__------F;nanc.nq Local Eat. Total Local Eat Total Locai Et. Total Local E.t Total Local Eat Total CW9JICATION5 (Ministry of Publ*c WOrks) 4d-rn.zat,on of Telegraph Sste - 1.0 - 1.0 1.3 - 1.3 1.4 - 1.4 1.5 - 2 5 5.2 0.0 5.2 Con.t.nct;on Pout and T-legraph Office - 0.3 - 0.3 0.8 - 0.8 0.8 - 0.8 0.8 - 0 8 2.7 0.0 2.7 (CATEL) SuPer-o;ron and Tech-ncal Ser,-ces - 1.7 - 1.7 6.0 - 6.0 9.0 - 9.0 9.0 - 9 0 25 7 0 0 25.7 Expa,.aon of ton Metrovol' TalephoneD8 I8R - 2385 4.2 7.0 11.2 8.e 6.2 14.2 - - 0.0 - - C. 0 12 2 13.2 25 4 Eapono.on of Earth Staton - - - 0.0 7.1 - 7.1 - - 0.0 - - O 0 7.1 0 0 7.1 E.Punoicr of Data Proces-ing Conte, IM - 2385 - - 0.0 0.1 0.2 0.3 - - 0.0 - - 0 0 0 1 0.2 0.3 Rural Telephone Deo-lopment III ID8 - 7O0SF 1 0 4.3 5.3 5.7 18.- 24.0 12.1 12.0 24.1 9.0 10.0 19 0 27 8 44 6 72 4 E.pans.on of Req,onol Systes T IB - 2385 0 6 3.3 3.9 11 0 8.1 19.1 10.2 8.6 18.8 5.4 3.1 8 5 27.2 23.1 50.3 E.Pan.,on of ele. Ser,,ce SyPtea I8R - 2385 - - 0.0 1.2 6.4 7.6 - - 0.0 - - 0 0 1.2 6 4 7.6 Expanason of Matrovol .tn System Cwmorc.-I - 10.0 10.0 9.0 10.5 19.5 11.0 19.0 30.0 5.0 5.5 10 5 25.0 45.0 70.0 EsPana;on of Reg.onal Telophon.s CoDmc,aI 0.3 9.0 9.3 8 1 8 0 16.1 10.0 - 10.0 5.0 4 9 9 9 23 4 21 9 45.3 Other Impro..monts tc Rog.onal\Rural System - - 0.0 1.2 - 1.2 - - 0.0 - - 0 0 I 2 0.0 1.2 EaergenCy Worck (CkTEL) - 8 0 - 8.0 8.0 - 8.0 10.0 - 20.0 10.0 - IC 0 36 0 0.0 36 0 Othr, ("AT_L) - 0.1 - 0.1 3.9 - 3 9 4.0 - 4.0 5.0 - 5C) 130 0 13.0 (N_ Proj *cto) Eapa-nion Cuateaola C.ty (50.000 In-e) not det"ra;n.d - - 0.0 _ - 0 7.1 34.0 41.1 10 4 38.7 49.1 17 5 72 7 90.2 Rural Telephones - IV IDB - Proposed - 0.0 - 0.0 1.0 2.B 3.8 1.0 2 8 3.8 2 0 S.6 7.6 System E.panason (250.000 I nea) not deters-ned - - 0.0 - 0.0 1.8 - 1.8 14.2 57.5 71 7 16 0 57.5 73.5 W Internat.onal Sa-Ce .ot det*,*.n.d - - 0.0 - - 0.0 - 2.1 2.1 - 1.3 1 3 0 0 3 4 3.4 TOTAL. COG Un-t.on. Sector 17.2 33.6 50.8 71.4 57.7 129.1 78 4 78.5 1569. 73 23.8 200.1 243.3 293 6 536.9 (gri_park.wk1) 15-F".-69 Table 2.7 G-uatml -PbicScorIvstetPrga (M Illion Guetraes11) Estimated------Prograimeed ------ Source of 1988 i989 1990 1991 TOTALS External------Financing Local Ext. Total Local Ext. Total Local Ext Total Local Ext Total Local E.t Total POWERSEaCTO (INDE) Goenaraton Aguacapa 1.4 - 1.4 - - 0.0 - - 0.0 - - 0 1 4 0 0 1 4 Pueblo Viajo-Chix,oy IDB l6Q1C 12.3 6.2 18.5 - - 0.0 - - 0.0 - - 0 0 12.3 6.2 18.5 El JluteCGallary(Chiinoy) Italy - - 0.0 - 7.5 7.5 - 7.5 7.5- - 0 0 0 0 15 0 130 Zunil I IDBe-7395P 0.2 0.5 0.7 2.4 9.7 12.1 8.1 16.3 T 24.4 5 6 84 14 0 16 3 34 9 51.2 (Cam urb,ne-6 Suppliers Credit - - 0.0 1 6 10.0 11 S 1.0 10 0 11 0 - - 0 0 2 5 20 0 22.5 Nsa Generation Projecta Santa Mar,a-2 not determined - - 0.0 - - 0 0 - - 0 0 6 7 27 0 33 7 6 7 27 0 33 7 Rio 9oboo notd4etermi.d - - 0.0 - - 0 0 1 6 2 4 4 0 8 0 120 20 0 6 14 4 24 0 Steam III not deteraied - - 0 0 - - 0 0 6 3 43.3 31.6 1 1 53 9 55 0 7 4 99.2 106 6 Tr...anm,aon Guatemur-Guate norte 0.2 - 0.2 0.2 - 0.2 - - CO0 - - 0 0 0 4 0 0 0 4 Guatoteml-El sSalnaor 3.8 - 3.8 0.5 - 0.5 - - 0.0 - - 0 0 4 3 0 0 4 3 NiowTransaission Projects Eaot-intl-S Sebastian Venezuela - Proposed - - 0.0 - - 0.0 2.9 13 9 16 8 2 2 10 4 12 6 S 1 24.3 29 4 S Sebastian-La Esparanza not datermied - - 0.0 - - 0.0 2 3 7 9 10.2 1 7 6 5 8.2 4 0 14 4 IS 4 C Substati-nfr.an. Line Juta.pa not determinmd - - 0 0 - - 0.0 1 0 4.3 5.3 1 4 6 5 7 9 2 4 10 8 13 20 Distribution Rural Electrification - II USAID - 520-T-038 2.6 0 8 3 4 3 0 3.0 6 0 5.0 5.0 10.0 5 0 5 0 10.0 15 6 13 8 29 4 SubstationsffDistributionNet Work- 5 3 - .3 12.2 - 12.2 24.3 - 24.3 24.1 - 24 1 65 9 0 0 65 9 69 KV Substetions/linem not determined 8.0 - 6.0 13.9 2.8 16.7 12.2 4.6 16.8 4 1 36 7 7 36 2 11 0 47.2 Geo-thermal Studies 208 -3S 1.5 - 1.5 1 9; 8.1 10 0 2 4 24.9 27.3 4 9 30 4 35.3 10 7 63 4 74.1 Small and '4xdiumHydas 20B 739SF 0.3 - 0.3 6.2 7.6 14 0 6.2 9 3 15.5 1 7 4 6 6.3 14 4 21 7 36.1 Chulac and Xelala IBM- 2724 - - 0.0 271 4.0 6.1 3.0 6.0 9.0 4.0 11 0 15.0 9 1 21 0 30.1 Other 4.5 - 4.5 9.2 - 9.2 9.7 - 9.7 9 7 - 9.7 33 1 0 0 33.1 Other Inymetfetoft Protection of R. ner Basin 0.7 - 0.7 1.3 - 1.3 1.3 - 1.3 1 3 - 1.3 4 6 0 0 4 6 Rehabilitation of ThermalIPlants IBM- 2724 - - 0.0 2 0 2.7 4 7 2 0 16 0 18 0 2 0 10.0 12.0 6 0 "87 34 7 Repair and Improvemnt Hidroplant. 0 0 0 8 - 0 8 0 8 - 0.8 0 6 - 0 6 2 4 0 0 2 4 Operating Center not determined - - 0 0 - 0 4 0 4 - 0.6 0.6 - 0 6 0.6 0 0 1 6 1 6 Equipment IBRD 2724 - - 0.0 - 0.4 0 4 1.2 4.5 5 7 3 3 12 2 15 5 4 5 17 1 21.6 SUBTOTAL JNIS .38.8 7.5 46 3 37.2 56 4 113.6 91.3 178 5 269.8 87 6 202.1 289 7 274 9 444 5 719.4 (EEGSA) Fifth Poser Project IBMO 2724 - - 0.0 - - 0 0 7.7 13 0 20 7 10.3 18 7 29.2 16.2 31 7 49 9 Other Distribution 21 3 - 21.3 23 0 - 23 0 9.3 - 9.3 0 4 - 0 4 5.4 0 0 0 54 0 SUBOTOTA,LEEGSA 21,.3 0 0 21.3 23 0 0.0 23 0 17 13.0 30O.0 10.9 18 7 29 6 72.2 31 7 103 9 TOTAL Pooer Sector 60.1 7 5 67.6 80.2 56 4 136 6 108.3 191 5 299.8 965S 2206 319.3 34'.1 476 2 8233 (gua-park-abl 15-Fxb-89 Table 2.8 OiI - bI! ;s-' Seto lnetet. -Pr-O- 0ae (";II ion Qo.tzalIaa) I----Estimamted --- I I ------P,0rags.d ------ Source of 1988 2989 1990 1991 TOTALS T T Totol Financ;ng Local Ext. --otal Local Ext. otal LocolI Et. Total Local E.t. otal Local E.t HOUSING AND2URBAN DEVELOPMBir (Nabt,o,ol Comitte. for Reconst,uct-on - CRN) - 2.0 a 0 3.0 11.0 Ca,aurty, Devalopaent Projectts USAID - Proposed 2.0 - 2.0 2.0 3.0 5.0 2.0 - 2.0 2.0 3.6 6 2 9 a 10 2 19.0 29.2 H.4si ng Rhahb. Ii tat,o/Doeeelopset I~-- 0.0 2.4 5.2 7.6 4.2 7.6 21.8 - 2 0 a 0 0.0 8.0 Eaerg..cy Programs 2.0 - 2.0 2.0 - 2 0 2.0 - 2.0 2.0 (Hou~~s-9nBank - BANVI) 63.2 1 8 37 3 39 1 29 8 107.2 137.0 So-. Houa,ng D-elpoosrt I139 - 8SF 1 4 1.0 2 4 12.3 20.0 32.3 14.3 48.9 0 - 2E.0 76 4 C00 76 4 Basc He,s-g (Hou..s,gCred.t)- 11 4 - 11 4 18 0 - 18.0 22.0 - 22.0 25 0 - 48.0 45.0 - 45 0 152 3 0 0, 152 3 "4ddle I,con Hm.rgn (Hlous.ng Cred,t) -23.3 - 23.3 SB 0 - 36.0 48 0.0 - - 0 0 1.2 6 5 7 7 Mun-cipal B- ld-ns I0S - 736SF - 1.9 1.9 1.2 4.6 5.8- - - - 0 0 2.3 10.2 12.5 Urbsa Street. D0- 736SF - 4 8 4.83 2.3 5.4 7 7 - - 0 0 O c 1 4 9.9 11.3 P.bl~cMarkets !D - 736Sr - 3.2 3.2 214 6 7 8.1 - - 0 0 - - 0 - - 0 0 02a 1 2 1.3 Slaugh~terHuses D0- 736SF . 0 3 0.3 0 1 0.9 1 0 - - 0 3.1 0 2 10 4 10 5 Other Works -.08 - 736SF I J 1.8 0.1 0.2 0.3 - 5.3 5 3 - 3 2 2.8 11.2 14 0 .3 8 15.2 19.0 Mur-cpal De.-lop,nrt IDB - Proposed - - 0.0 - - 0 0 1.0 4.0 5 0 (Mr.-stry of PublIc Works) - 4.0 158a 00 188a Urbar Streets -3.5 - 3.5 4 3 - 4.3 4.0 - 4.0 4 0 0 0 2 8 17 7 20.541 Central Market I08 - 4430C 0.8 8 4 7.2 1 0 9) 3 10.3 1.0 2.0 3.0 - - 0.9 0.9 - 0.5 0.5 0 0 4 4 4 4 Cadvatre im- 1.0 1 0 - 2.0 2.0 - 0 1.8 3.8 5 4 5 0 12.5 17.5 Road limpr"onemets 188 0 7 2.0 2.7 1.3 3.1 4.4 1 4 3.6 5 1.5 0.0 5 3 B 3 Inast-tut-ral D-xelopsent IBFt - - 0.0 - 1.8 1.3 - 2.0 2.0 - 1.5 16.8 57.1 0 0 57.1 Other Irneetments- 11 9 - 11.9 13 4 - 13 4 15.0 - 15.0 18 8 - 104.6 63.6 168.2 374 3 22.5 596.8 TOTAL Housing an,d Urban D"eolopsent Sector S7.0 22.4 79 4 97.8 62.2 160.0 114 9 74.3 189.2 OTHER IPNYeTME4r - 137 4 0 0 137.4 P'in,stryof Defense - 31.7 - 31.7 34.7 - 34.7 35.0 - 35.0 36.0 36.0 4.4 16.4 0.0 16 4 P'inetry of Interior - 4.2 - 4.2 3.6 - 3.6 4.2 - 4.2 4.4 - 1.6 5.1 0.0 5.1 P4 of Labor (Conat of Recreation Centers) - 0.5 - 0.5 1.5 - 1.5 1.5 - 1.$ 1.6 - 6 0 2.0 - 2.0 16.8 0 0 16.8 M4 oF Publ,c Works (Const of Pubhc Bu. dings) - 3.0 - 3 0 5.8 - S.8 8.0 - 0.8 0.6 - 0.6 2 3 0.0 2.3 M. ofr Pubtic Works (Wfg 8u;ldirg Materials) - 0.5 - 0.5 0.6 - 0.6 0.6 - 6.0 - 6.0 18 0 0 0 18.0 Mnatry of Energy and Mnes - 2.5 - 2.5 4.5 - 4.5 5.0 - 5.0 4.6 - 4.6 19 7 0 0 19.7 M4.of Culture and Sports (Rost of Su.ld /Mou.u - 4.8 - 4.8 3.3 - 5.3 5 0 - 5.0 - 3.9 18 8 0 0 18.8 M.af Cultur, and Sports (Sport Fac;lit,es) - 4.7 - 4 7 6.1 - 6.1 4.1 - 4.1 3.0D 428 9 0 0 428.9 Mu,c,pal tam (Budgeted/811) - 78.1 - 78.1 98.9 - 96.9 115.2 - 115.2 139.7 - 138.7 0.0 197.8 663 4 0.0 663.4 TOTAL- Other In-s5t-et 130.0 0.0 130.0 159.0 0.0 159.0 176.6 0.0 176.6 197.8 782.41479.4 23801i2308 14688.2 ORANDTOTAL 4030O 267.6 670.6 602,0 .565.01167.0 678.1 693.11371.2 697.0 (qua._park.. kI) 15-Feb-89 Table 2.9 Custeala - Pubill: Sector xnceetmnt Progran (101l l on QAuetzal*s) I-----Estiated- I…orlm1------lrormsmed ------ Source of 1988 1969 1990 TOTALS Ecternalt______T Financing Local Eat. Total Loca' Eat Total Local Ext Total Local Eat 'ota. Local Ent otal TOTAL BY SECTORS 403.0 267.6 670.6 602.0 565.0 1167.0 678.1 693.1 1371.2 697.0 782.4 1479 4 2380 1 2308 1 4688.2 Educat,on 3.1 15.0 18.1 17.4 24.5 41.9 10.4 22.2 32.6 13.9 27.2 41 1 44 8 8 9 133.7 Health 26.1 40.9 67.0 26.3 56.8 83.1 16.9 22.5 39.4 17.1 23.0 40 1 8G 4 143 2 229 6 Agr cultu'e 62.3 76.2 138.5 84.1 132.4 216.5 94.9 150.4 245.3 99.4 155.8 255.2 340 7 514.8 835.5 Tranaport 33.6 27.0 60.6 50.4 119.5 169 9 63.4 97.6 161.0 63.4 80.2 143 5 210 8 324.2 535 0 Water supply 13.6 45.0 58.6 15.4 SS.5 70.9 14.3 56.1 70 4 26.0 88 1 114 1 69 3 244.7 314 0 Commun'caton 17.2 33.6 50.8 71 4 57.7 129.1 78.4 78.5 156.9 76.3 123.8 200 1 243 3 293 6 536.9 Poear 60.1 7.5 67.6 80.2 56 4 136.6 108.3 191.5 299.8 98.5 220.8 319 3 347 1 476 2 823.3 Hou.ng and Urban Oecelopenv,t 57.0 22 4 79 4 97 8 62.2 160.0 114.9 74.3 189.2 104.6 63 6 168 2 374 3 222 5 596.8 Dther 130 0 0 0 130.0 159.0 0.0 159.0 176.6 0.0 176.6 197.8 0 0 197 8 663 4 0 0 663 4 As Percent of Total by Sectors 100.0 100 0 100 0 100.0 100.0 100 0 100.0 100.0 100.0 100.0 100 0 100 0 100 0 100 0 100.0 Education 0 8 S.6 2.7 2.9 4.3 3.6 1.5 3.2 2 4 2.0 3.5 B 1 9 3 9 2 9 Health 6 5 15 3 10.0 4 4 10.1 7.1 2.5 3.2 2.9 2.5 2 9 2 7 3 6 6 2 4.9 Agricultur- 15.5 28 5 20.7 14.0 23 4 18 6 14.0 21.7 17 9 14.3 199 17 3 14 3 22 3 18.2 7 r-neport 8 3 10 1 9.0 8 4 21 1 14.6 9.3 14.1 11 7 9.1 10.2 9 7 9 9 14 0 11 4 Water Supply 3.4 16 8 8.7 2.6 9 8 6.1 2.1 8.1 5.1 3.7 11.3 7 7 2 0 10 6 6.7 CommunjCation 4.3 12 6 7.6 11.9 10.2 11.1 11.6 11.3 11.4 10.9 15.8 13 5 10 2 12 7 11.5 Pomer 14 9 2 8 10.1 13 3 10.0 11 7 16.0 27.6 21 9 14.1 28.2 21 6 14 6 20 6 17 6 Hou-ing and Urban Dr-lcp-.t 14.1 8 4 11.8 16.2 11.0 13 7 16.9 10.7 13.8 15.0 8.1 11 4 15 7 9 6 12.7 Oth-r 32.3 0.0 19.4 26 4 0.0 13.6 26.0 0.0 129 28.4 0.0 13 4 27 9 0 0 14.2 A& Percent of Total Fnarcing 60.1 39.9 100.0 51.6 48.4 100.0 49.5 50.5 100 0 47.1 52.9 100 0 50 8 49.2 100.0 1. Educat, on 17.1 82 0 100.0 41.5 58.5 100.0 31.9 68.1 100 0 33.8 66.2 100.0 33 5 66.5 100.0 Health 39.0 61.0 100.0 3.6 68.4 100 0 42.9 57.1 100 0 42.6 57 4 100 0 37 6 62 4 100 0 Ag- culture 45.0 55.0 100 0 38.8 61.2 100.0 38.7 61.3 100.0 38.9 61.1 100 0 39 8 60.2 100.0 T 1 ranaport 55 4 44 6 100.0 29.7 70.3 100.0 39.4 60.6 100.0 44.2 55.8 100 0 39.4 60 6 100.0 Water Supply 23.2 76.8 100.0 21 7 78.3 100.0 20.3 79.7 100.0 22.8 7'7.2 100 0 22 1 77 9 100.0 Coeun.-ct,on 33 9 66.1 100.0 55.3 44.7 100.0 50.0 50.0 100.0 38.1 61 9 100 0 45 3 54 7 100.0 Poeer 88.9 11.1 100.0 56.7 41.3 100.0 36.1 63.9 100 0 30.8 69.2 100 0 42.2 57.8 100.0 Housing and Urban De,elopme,t 71.8 28.2 100.0 61.1 38.9 100 0 60.7 39.3 100.0 62.2 37 8 100 0 62 7 37 3 100.0 Other 100 0 0 0 100 0 100.0 0.0 100 0 100.0 0.0 100.0 100.0 0 0 100 0 100 0 0 0 100.0 (gua_park akl) 15-Feb-89 Table 2 .10 OusItemmla - PublIc, sector 1nvmstasent Program (Million Quetralas) I----Estimated ---- I ------Progread ------I T Source of 1988 1989 1990 1991 L T Financin,g Local Ext Total Locsl Ext. Total Local Ent. Total Local Eat ot.i Lees Ext 7otal 2367 1308.1 4688.2 TOTAL.BY INiSTfl.JION 403 0 267.6 670 6 602 0 585.0 1167.0 678.1 693.1 1371.2 697 0 782 4 1479 4 I Tota- Nov ti.nancial Public Sector 305 6 2300 35U6 453.9 471£4 927.8 507.8 563.2 1071.0 328 0 632 4 1160 4 1797 3 1897 5 3694.8 Ministry of Education 0.2 2.7 2.9 1.4 17.0 18.4 0.8 4.7 5.5 0.0 0.0 Qci 2 4 24 4 2668 Ministry of Public Worka 39.3 56.0 115.5 86.3 165.3 251.8 74.5 78.7 153.2 72 4 73.0 145 4 292 7 373.2 665.9 Ministry of Health 3.4 61.2 64.6 9.0 54.7 63.7 7.7 51.8 59.5 10 1 60.? 70 8 30.2 228 4 258.6 Ministry of Agricul'.wre 0.3 53 4 33.9 6.9 73.8 80.7 6.8 73.0 79.6 10 7 71.1 81 8 24 9 271 3 296.2 Ministry of Development 3 4 0.0 3 4 6.8 9.1 15.9 12.0 20.8 32.82 13.2 2335 36 7 35 4 53 4 888a Ministry of Dmfence 31 7 - 31 7 34.7 - 34.7 35.0 - 35 0 36 0 - 367C 137 4 0 0137 4 Ministry of Interior 4.2 - 4.2 3.6 - 3.6 4.2 - 4.2 4 4 - 4 4 lf 4 0 0 16 4 Ministry o'f Labor 0 5 - 0.5 1.5 - 1.5 1.3 - 1.5 1 6 - 1 6 51I 0.0 5.1 Ministry of Energy and Mines 2.5 - z 5 4.5 - 4.5 5.0 - 5.0 6 0 - 6 C 16 0 0 0 18 0 Ministry of Culture and Sports 9.5 0 0 9.5 13 4 0.0 11.4 9.1 0.0 9.1 8.5 0 0 8.51 38 5 0 0 38.5 6.2 13 6 26 2 22 0 48.2 CRNu- National Coin for Recons. 4.0 0 0 4 0 6.4 8.2 14.6 8.2 7.6 15.8 7.6 SUBTOTAL. Central Government 119 4 173.3 292 7 172.5 328.3 300.8 164.8 236.6 401 4 170 5 234 5 405 Ci 627 2 972.7 1599 9 law3 13.1 - 13.1 10.0 - 10.0O 10.0 - 10.0 10.0 - 10 Cl 43 1 0 0 43 1 INTA 2.6 0.9 3.3 2.6 1 0 3.6 2.6 1.0 38a 2 4 0.8 3 1 10 4 3 7 14 1 ICTA 0.3 1.2 1.3 1 7 2 4 4.1 3.2 7.0 10.2 2.3 5.0 7 3 7 5 15.6 23.1 INAFOR - 0.8 08a - - 0.0 - - 00 - - 0 0 0 0 0.8 08a SUBTOTAL Dea-entralized Agencies 16.0 2 9 18 9 14 3 3 4 17.7 16.0 8.0 24.0 14 7 5 8 20 5 61 0 20 1 61 1 27 9 27 9 1 INiCEA - - 0.0 - 7 4 7.4 - 9.2 9.2 - 11.3 11 3 0 C Port of SartoTomas de Castlls 0 0 0 0 0 0 3.5 0.0 5.5 6.0 16 6 22.6 6 9 10.0 169o 18 4 26 6 4.50 Port of Qu-tzal 3.1 5 7 8.8 - 4.7 4.7 - - 00 - - 0 0 312 10.4 13 5 Port of Chavpeerco - - 0 0 1 0 - 1.0 - - 0.0 - - 0 0 1 0 0.0 1.0I EWAOUA 0 4 4 0 4 4 1.5 7.1 8.6 4 9 16.3 21.2 6.3 20 4 26 7 13 1 478b 60.9 IIUATEL 15.9 33 6 49.5 69.3 57.7 127 0 76.2 78.5 15-4.7 74.0 123 8 197.8 235 4 293 6 329 0 INDE 38.8 7.5 46.3 57.2 58 4 113.6 91.3 178.5 269.8 87 6 202.1 289 7 274 9 444 5 719 4 88054 21.3 0.0 21 3 23.0 0 0 23.0 17.0 13.0 30.0 10 9 18.7 29 6 72.2 31.7 103 9 SUBTOTAL Non Financial Public Erterprises 79.5 5C.8 130 3 157.5 133.3 290.8 195 4 312.1 507 5 185.7 386.3 872 0 618.1 882.5 1500 6 Mun-cpaS-ty o-f Guatemala 12 6 3 0 16 6 14 7 1.9 21.6 16 4 6.5 22 9 18 4 5.8 24.2 62 1 22.2 84 3 MunCicPalties (Budgeted/SI) 78.1 - 78.1 96 9 - 96.9 115.2 - 115.2 138 7 - 138 7 428 9 0.0 428 9 SUBTOTAL Municipalities 90.7 3 0 93.7 111.6 6.9 118.3 131 6 6.5 138.1 137.1 3.8 162.9 491 0 22.2 513.2 Total Financial Institutions 97 4 37 6 135 0 146.1 93.1 239.2 170.3 129.9 300.2 169 0 150.0 319.0 582 8 410 6 993 A 70 4 324.9 BANDESA ~~~~~~~~~~59.710 0 69 7 60.0 22 9 82.9 64 9 12.9 77.8 69.9 24.6 94.5 254 5 Baec. de Guatemala 0.0 108a 10 8 13 7 25 9 39.6 18.1 48.3 66 4 14 5 43.8 58 3 46 3 123 8 173.1 BAWl 36.1 1 0 37 1 68 3 20.0 86.3 84.3 48.9 135.2 71.8 37.3 109 2 238.5 107.2 36537 127 7 INFIM 1 6 15 8 17 4 6.1 24 3 3C.4 3.0 19.8 228a 12 8 4.4.3 57.1' 23 5 104.2 (guassark ski) 15-Feb-89 Table 2. 11 Guatea la - PubIc. Sector In.eatment P-agree Page 1 of 6 Estimated-I I-Programa.d-I Q..Z I** SourCe of 1988 1989 1990 1991 TOTALS External…------Firanc-ng Local Ext. Total Local Ext Total Local Ext. Total Local Ext Total LoCa' Ext Eotal CAUNTS 18.7 64 3 81.) 27.9 112.2 140.1 22.0 64.5 88.5 22.3 59 3 82 6 8E 14 300 4 389 3 Comestr of Secondary and Rural Areas Roads U.1AID Grant 0 8 0.9 1.7 0.8 1.0 1.8 0.9 1.0 1 9 0 4 0.8 1.2 2 9 3 7 8.8 Cirnat.Rura Primay Schoo,ls L.1SAID-Crant - B 8 8.8 4.5 2.1 8.6 - 6.5 6.5 - 6.5 6.5 A 5 21 7 26.2 Immunizati-n and Infant Surviva (SAID- Grant - 7.0 7.0 - 8.5 8.5 - 8.5 8.5 - 9 0 9 0 0 0 33 0 33.0 Conet and Rr'-ar Health Centes- 3 Paste (sAID - Grnt 1.1 1.8 2.7 3.1 - 3 1 2.7 - 2.7 2.7 - 2 7 9 6 1.6 11.2 Mini Irrigation (Altiplano) UOSAID-Grant - 11.3 11.3 0.3 0.6 0.9 - - 0.0 - - 0.0 0 3 11.9 12.2 Small Scale Irrgatiol, USAID- Grant - 9.3 9.3 - 7.0 7.0 - 6.9 6.9 - 6.2 6.2 C, 29 4 29 4 Marketing Studies Mini Irrigatio U.1AID Grant - 0 9 0 9 - 0.2 0.2 - 0.2 0.2 - 0.2 0.2 C 0 1.5 1.5 Well Drilling-Altiplano US541D Grant - 2.0 2.0 - 10 0 10 0 - 4.8 4.8 - 2 0 2 0 0 0 188 is88 Feasibility Studie-Irriatio 1.1SAID Crant - 3 4 3 4 1.1 - 1 1 2.2 - 2.2 2.9 - 2 9 6 2 3 4 9.8 Irrigation Guatalor Rio Bravo (1S4ID Crant - 1.1 1.1 - 1.7 1.7 - - 0.0 - - 0 0 Ci 0 2.8 2 8 IrrrigationhluevaConcepcion (SAID-Grant - - 0.0 - 4.3 4.3 - 4.0 4 0 - 40 4 0 0 0 12 3 12 3 Seed Production USAID0 Grant - - 0.0 - 0.1 0.1 - 0.2 0.2 - 0.2 0 2 0 0 0 5 0.5 Agriculture Planning Poject Develp. USAID- Grant - 2.4 2.4 - 0.8 0.8 - 1.0 1 0 - 1.0 1.0 0 0 5.2 5 2 Protection of Water Sources LISAID -Crant - - 0.0 - 1.2 1.2 - 1.2 1.2 - 1.5 1.5 0 0 3 9 3 9 Reforeatation for Cosmercial Use (154AID Grant - - 0.0 - 8.5 6 5 - 7.0 7 0 - 7.5 7.5 0 0 21 0 21 0 Tree Nrseries 1.1SAID Grant - - 0.0 - 2 4 2 4 - 2.5 2.5 - 2.5 2 5 0,0 7 4 7 4 Other U15AID-Grant 0.5 086 1.1 0.5 0 6 1.2 0.5 0.7 1.2 0.3 07 1.2 2 0 2 6 4.6 Construction Rural Access-Labor Intensiv (OSAID -Crant - - 0 0 - 10 8 10 8 - - 0.0 - - 0 0 Ci 0 10 6 10 8 Pared (ISAID-Grant 2.3 - 2.3 2.8 4.0 8.8 2 4 - 2 4 2.8 - 2.8 103 4.0 14.3 Xaya-Pi-ccaya-StageII (OSAID- Grant 7.4 - 7 4 3.8 3.6 7.2 - - 0 0 - - 0.0 11 0 3 8 14.8 Other Water Supply/Sanitation USAID -Crant 0.7 - 0.7 1.9 0.3 2.2 1 2 - 1.2 1.2 - 1.2 5 0 0.3 5.3 (5iEPAR Construction Rural Water Supply L15SA0 Grant - 1.5 1.5 - 1.9 1 9 - 1.9 1.9 - - 0 0 0 0 5 3 5.3 UNEPAR Rural Water Supply, Peter USAID- Grant 0.1 0.5 0.8 0.2 0.7 0 9 0.2 0.7 0.9 0.2 0.7 0.9 0 7 2 8 3.3 D54A Rural Water Sut ily 1.1AID - Grnt - 4 8 4.8 - 4.9 4 9 - - 0 0 - - 0 0 0 0 9 5 9.5 4' D54 Rural Sen;tetion LUSAID Crant - 0.5 0.5 - 1.0 1 0 - 0.8 0.8 - - 0 0 C. 0 2.1 2 1 S- Transfer of Tech.Inoog-Linestock U.15ID-CGant - 0 4 0.4 - 0.8 0 8 - 0.5 0.5 - 0.2 0.2 0 0 2.0 2 0 U.'AID - Grant 12.9 54.5 87 4 18.8 74.8 93.6 10.i 48.2 58.3 10.7 43.0 53.7 52 5 220 8 273.1 Cons,truct-n and Maintenance of Hloapitals U5SAID-Crant-Propoaed - - 0.0 - 4.1 4.1 - - 0.0 - - 0.0 0 0 4 1 4.1 Construction of Clinics and health Posts (SAID-Grant-Proposed - - 0 0 - 1.2 1.2 - - 0.0 - - 0.0 0 0 1.2 1.2 Conet Eacuintla-Puerte Queczal (ISAID-Grant-Proposed 0.9 - 0.9 4.0 3.5 7.5 - - 0.0 - - 0.0 4 9 3.5 8 4 Improvement Los Encuentros-Ouichr (ISAID-Grant-Proposed - - 0.0 0.8 0.5 1 1 - 8 - 5.8 1.21 0 12.8 0 5.9 5.9 5 5 Construction Mechaqui 1 Bridge UJSAID-Grant-roposed 0.1 - 0.1 0.4 0.6 1 0 - - 0.0 - - 0 0 0 5 0 6 1 1 Constructio Samayac - San Pablo (SAID-Grant-Proposed 0.5 - 0.5 0.8 0.8 1 4 - - 0.0 - - 0.0 1 1 0.8 1.9 Construction Chiicacao-SanPedro Cutzen (SAI:D-Grant-Proposed 0.1 - 0.1 0.5 0.3 0.8 - - 0 0 - - 0.0 0 6 0.3 0 9 Construction San Miguel Panan USAID-Grant-Proposed 0.2 - 0.2 1.2 1.2 2 4 - - 0.0 - - 0.0 1 4 1.2 2.8 Rural AkccessRoads (SAID-Grant-Proposwed 2.0 - 2.0 1.5 3.0 4.5 8.0 - 8.0 8.0 - 6.0 15.5 3 0 18 $ (ISAID - Grant - Proposed 3.8 0.0 3.8 8 8 15.2 24 0 11 9 0.0 11.9 1186 0 0 1186 361 13 2 31.3 SUBJTOTAL (ISAID 16.7 54.5 71.2 27.8 90.0 117 8 22.0 48.2 70.2 22.3 43.0 85.3 88 6 235.8 324 4 Mini Irrgatio Italy - Grant - 8 8 8.6 - 10.3 10.3 - 10.3 10.3 - 10.3 10.3 0 0 39 5 39.5 Irrgation Nveva Concepcion Italy - Grant - - 0.0 - 6 7 8 7 - 8.0 6.0 - 6 0 8.0 0 0 20 7 20.7 Small Parser Development (Cric) italy - Grant - - 0.0 - 1.0 1 0 - - 0.0 - - 0 0 0 0 1 0 1.0 Other Livestock Development Italy - Grant - 1.2 1.2 0.3 2.2 2 5 - - 0.0 - - 0.0 0 3 3 4 3.7 SUJBTOTAL Italy 0 0 9.8 9.8 0 3 22.2 22.5 0.0 16.3 16.3 0 0 16 3 16.3 0 3 648 84.9 (gue_park .. k1) 15-Feb-89 Table 2.11 Outl - bl;c s5ctor In""st"t Prw"a Page 2 of 6 (Fli II icr Qutz l--) -----} E tiaotad----- I I ------Progr_amd ------I Soorce of 1988 1989 199O 1991 TSXTALS t EsXrn I ------T ------_---_-----T --- _------_----- Firancing ~----Local Ert. Total Local Ext. otal LOcal Ext. Total Local Et ot.1 L.ocal E.t otal 4 IAUTILATER9ALIGNSTitrUrZ 38 8 127.0 165.8 112 4 306.8 421.2 124.6 333.9 458.5 121 9 362 0 483 q 397 . *131 7 1529 35.1 "ter Supply Rahmbilitation I, - 2759 - - 0.0 1.5 5.3 6.8 2.9 9.9 12.8 3 5 12 0 15 5 7 9 27.2 30.1 Ch.lac and Xalel IIDE - 2724 - - 0.0 2.1 4.0 6.1 3.0 6.0 9.0 4.0 .1.0 1s G 9 1 21.0 6 34.7 R.habilitation of Theaal Pla.ts 1BRD- 2724 - - 0.0 2.0 2.7 4.7 2.0 16.0 18.0 2.0 10 0 12 0 0 28 7 17.1 21.6 Eau;pmnt IDE - 2724 - - 0.0 - O.4 0.4 2 4.5 5.7 3.3 12.2 15 5 4 5 Fifth Po., PFrojact IDER - 2724 - - 0.0 - - 0.0 7.; 13.0 20.7 10.5 18.7 29.2 16.2 33.7 49.9 25 4 Expan-io, of Matvool ita Talaphonoa If - 2385 4.2 7.0 11.2 8.0 6.2 14.2 - - 0.0 - - 0 0 12.2 13.2 0.3 E.Pane..r- of Data Procaaing Cant,r ImD - 233 - - 0.0 0.1 0.2 0.3 - - 0.0 - - 0 0 0 1 0.2 1 5C 3 Expanw*,o of Ragional System IRDE - 2385 0.6 3.3 3.9 11.0 8.1 19.1 10.2 8.6 18.6 5 4 3 1 8 5 27 2 23 7 6 Eapansio. of Talea Sr.t-c Systat I8DE - 2385 - - 0.0 1.2 6 4 7.6 - - 0 0 - - 0 C 1 2 6 4 Planning and Pro.-maa.in I8R - 2328 - 0.2 0.2 - 2.0 2.0 - - 0.0 - - 0 0 0 2.2 2.2 0 0 10 8 Canalta. (orban prrery prejact) IiiR - 2328 0 1 1.4 1.5 0.5 6.1 6.6 0.3 2.4 2.7 -0 9 9 9 Cront. Urban Pr,m,y School (V.rginal Ara&) I0 - 2328 0.3 0.7 1.0 1.2 2.3 3.5 1.0 2.5 3.5 - - 0 0 2.5 5 5 8.D 8 0 8sic Ed.cation (Eduencion Mi4ni) I8R - Appro,od - - 0.0 - - 0.0 0.8 8.5 9.3 6.0 20 7 26 7 6 29.2 36 Secondary Road Rahabilitat;ion I8RD - Appmoned - - 0.0 - - 0.0 2.1 3.9 6.0 5 9 10 9 16 B 8.0 14 8 22.8 Hou.ing Rahabl,taion/D-ecploaant IDE - - 0.0 2.4 5.2 7.6 4.2 7.6 11.8 3.6 6.2 9 6 10 2 19 0 29.2 4 4 Cadastr Iwo - 1.0 1.0 - 2.0 2.0 - 0 9 0.9 - 0.5 0 5 C 0 4 4 Road lnpro,want. I8R 0 7 2.0 2.7 1.3 3.1 4.4 1.4 3.6 5.0 1.6 38 54 5 C 12 5 17.5 Inatitutional DO alopast II - - 0.0 - 1.8 1.8 - 2.0 2.0 - 1 5 1 5 0 0 5.3 5.3 4 391.2 SUDT07ALt IBM 5.9 15.6 21.5 31.3 55.8 87.1 36.8 89.4 126.2 45.8 110.6 156 4 119 8 .71 1n (9u9-parkh.ll) 15-Fcb-89 Table 2.11 Cutsl-Pb.c .tenFrro Page 3 of 6 (M iII- QutZ" I..) S-or. of 1988 1989 1990 1991 rlL T F;n--a ~L..*lE.t Tot1 LocalI Eat ots I LocalI Eat Tote, LoCs' E.t 'r.,. L-1. E-t 'ot., 8 a.c Hou-9 De-epeent IDB- B04SF 1 4 1 0 2 4 12 3 20.0 32.3 14 3 48.9 63.2 1 8 37 3 3921 -; I'.F1 1 l3'0 Z-1i I IDS -739SF 0.2 0.3 0 7 2 4 9 7 1212 8.1 16.3 24 4 3 6 84 2414 162 3491 5.1.2 Ge-th-res' Studies 1MS 739SF 1.5 - 1.5 1 9 8.1 10 0 2 4 24 9 27.3 4 9 30 4 33 3 IC 63 4 74.2 Sin!I s.d Mod... Hyde. MS8 739SF 0.3 - 0.3 6.2 7.8 14 0 6.2 9.3 15.5 1 7 4 6 El 3 14 21 7 36 1 M..,.-Pal B..', d.ng. MB8 736SF - 1.9 1.9 1.2 4.6 3.8 - - 0.0 - - 0 0 1 2 6.5 7 7 Urban Ste.6..to0ID- 736SF - 4.8 4.8 2.3 5.4 7.7 - - 0.0 - - 0 C' 3 10.2 12 5 Public MaIk.t. MB8-736SF - 3.2 Z.2 1.4 6.7 8.1 - - 0.0 - - 0 1 4 9 9 11.3 Slaughter Houses MB8-7365F - 0.3 0.3 0.1 0.9 I10 - - 0 0 - - 0 0 1 1 2 1 3 Otu.- worba me8-736F - I8a 1.8 0.1 0.2 0 3 - 5 3 5 3 - 31 3 1 0 1 10 4 10 5 L*EPAF Ado.n-tratio./r.ch-c.I Serocee 1MD 719SF 1.2 1.5 2.7 1.5 1.8 3 3 1.8 1 5 3 3 - 0 0 4 -5. 4 8 9 3 UNEPAR9 Co-st,uct.onR.ral Water Supply MD8 719SIF 0.3 23 7 24 0 2 7 17.8 20.5, - - 0 0- C, C' 3 2 41 5 44 5 R-ra 7el.phoone Doscopmert III MB8 708SF I0 4.3 5 3 5 7 18.3 24 0 12.2. 12.0 24 2 9 0 20 0 29 0 27 8 44 6 72 4 Rural P-mz.y (PR10DERR) MO8 - 70TSF 0.1 1 1 1.2 0.9 8.9 9 8 0 5 2.3 2 8 - - 0,0 1 5 12 3 13 8 C-..t Rural P,..-y Sckoola IDS 707SF 1 0 5 0 6 0 0.5 3 2 3 6 - - 0 0 C.-0 1 5 8 1 9 6 Weter SuPply/Seseras in Second-,, cities 108 671SF 1.6 3.8 S 4 1.0 6.3 7 5 1I0 8.5 7.3 - - 0 3 6 16 8 20 4 A.. al H.asIth MS8 667SF - 7.8 7.8 1.6 2 9 4 5 - - 0 0 - - 0 0 2 & 20 7 12 3 Conatruct,- and tntan of Hosp.t.10 rD9 - 623SF 6.6 11.9 18.5 6.7 29 4 36 2 - - 0 0 - 0 13 3 41 3 54.6 Conetru-t-oof Cl.nicsand Health Posts MO8-62356 0.7 3.4 412 1 4 5 4 68a - - 0 0 - - 0 0 22 668 10 9 r-Gat,on II MO8-Appro,ed - - 0.0 0 5 10 1.5 09 2 9 3.8 18a 6 0 758 3 2 9 9 13 1 Ag-c.1t.- Crad.t IDB-5290C - 10 8 10.8 13 7 25 9 39.6 16 4 42 5 589 IC 0 28 8 3858 40 1 1080 148 1 Tr-n.f.r7ech.ology-PROGErrAPS MB8-4730C I/ 01 2 .2 1.3 1 5 2.4 3 9 3.0 7.0 10 0 2 0 5.0 7 0 5 6 1St6 22.2 7ranfer of T..hnolowY-Lmvsst-kl 108 4730C - 1.0 I 0 - 1.1 1 I - 1.2 -1.2 - 0 6 C 6 0 0 3 9 3 9 Central Market r08 - 4.4.3C 0.8 6.4 7.2 1 0 9.3 10 3 1.0 2 0 3.0- 0 0 2 8 17 7 20.5 Rehab /Conet-. Rural Rcad.-lW. CA-1 Ipala rD8 - 216 0.3 0.2 0.5 0.9 3 9 4 8 0.3 2.2 2.5 - 0 0 1 5 £ 3 7 a Rehab /Conet, Rur1 Rosda-IV. CA-8 Mpy.ta 10O 216 - 0.2 0.2 1 0 6.1 7 1 0.3 2.6 2.9 - - 0 0 2 3 8 9 10.2 Rob /Con. Rural Roads-TV. QuotzasIt-San Ju.n 108 216 0.3 0.1 0 4 0.2 3 4 3 6 - - 0.0- - 0 0 0 5 3 5 4 0 463 Rob /Cons. R.rsi Roads-IV, Quetzslt.-Sen Carlo 108MO 216 - 1.9 I 9 0 3 4.7 5 0 0.2 1.2 1 4 - - 0 0 0 3 7 8 8 3 R-ra Access Rooda-Pa-t IV' MO8 797 1.4 3.5 4.9 0 9 3 4 4 3 0.9 3.4 4 3 0 6 3 0 3 8 4 0 13 3 17.3 Pueblo V ; jo-Cho. , MO8 -iEQic 12.3 6.2 18.5 - - 0.0 - - 0.0 - - 0 0 12 3 6 2 13 5 Reconst-ution CA-9-R.o Hando 10O Ise6 0.5 - 0.5 4.6 21 1 25 7 5.2 15 7 20.9 6 5 17 7 24.2 26 8 5.4 5 71.3 1DB 31.6 107.5 189 1 74.5 239.8 314 3 74.6 207 7 282.3 4.41 154 9 199 0 2246 7099 93471 Chi.oyReforestation Me8-Proposad - - 0.0 - - 0.0 - - 0 0 28a 60 7 8 18 6 0 7 8 Sml ionn. Medium Farmer Credit 108O Propos.ed - - 0.0 - - 0.0 1.7 36a 7.5 4.3 15 0 19.3 6 2 20 8 27 0 St), Wete-S.pply/S.eerage So. Cit. as(IN*t8M) MS P-P posed - - 0.0 - - 0 0 1 0 4 0 5 0 10 0 30 0 40 0 11 0 34 0 45 0 R.ral Water Supply (UNEPAR) 10O Proposed - - 0.0 - - 0.0 21.0 7.5 8.5 5 0 20 0 25 0 6 0 27.5 33.5 Rural Telephonse - IV MB8-Propoasd - - 0.0 - - 0 0 1.0 2.8 3.8 1 0 28 3 8 2 0 5 6 7 6 Munic,pvl Dsnelopment 10O Provo.ed - - 0.0 - - 0.0 1.0 4.0 3.0 2 8 11.2 14 0 3 6 15.2 19 0 MO8- Proposed 0.0 0.0 0.0 0.0 0 0 0 0 5 7 1'14.1 29.8 25.1 85S0 110 1 30 8 1092 139 9 SLUBTOTAL 108 31 6 107.5 139.1 74.5 239.8 314 3 80.3 231.8 312 1 69.2 239 9 3019.1 255 6 619 0 1074 6 T".nsf*r of Technology-L-eatocl rFAD - 154-w3 - 0.3 0.3 - 0.8 0.6 - 0 A 0 4 - 0 2 0.2 0 0 1 6 1.6 ZacapmfChau.eomls Rural Denelopwent IFAD/Neth'erl -Prop. - - 0.0 - - 0 0 0.3 2.5 3 0 1 0 510 6 0 1 5 7 5 9 0 SUBTOTAL- IFAD 0.0 0.3 0.3 0 0 0.8 0.8 0.5 2 9 3 4 10D 5.2 6.2 1 5 9;1 10.6 W.den-ng CA-1-C)n Justo CABOI - 164 0 4 1 4 1 8 5.2 2 9 8.3 S.7 2 4 8 1 5.3 3 0 6 3 16 6 9 7 26.31 R.h*b,l,t.t,on CA-9 El Ranclh-R,o Hondo CA8EI 0.2 - 0.2 0 4 2.5 2 9 0 4 2.1. 2.5 0 3 1.9 2.2 1 3 6 3 7 8 R.hob,litat,on CA-2 Tainiaco-dle Alnarodo CASE! 0.2 - 0.2 0.5 3.2 3.7 0.4 2.3 2.7 0.3 I A ; 7 1 4 6 16 8.3 Rohs CA-I - 8*,bsr-na El Holino CANT 0.1 - 0.1 0.5 3.8 4.3 0.5 3.0 3.5- - 0 0 I.I 6 B 7 9 Pumping Stat.onImpro.:aent CA8EI 0 4 2.2 2.6 - - 0.0 - - 0 0 - - 0 0 0 4 2 2 2.6 SUBTOTAL- CASEI 1.3 3.6 4.9 6.6 1224 19.0 7.0 9.8 16.8 5 9 6.3 12.2 2068 32 1 52 9 (qus_park.. kI) 15-Feb-89 Table 2.*11 ruatopla - P *c, soctOr I,-"tnlt 6O Page 4 of 6 CHMi onipr Q..tzaI..) Eati.atad - I~------FrogrOa.od------ Soo'.. of 1981989 1990 1991 TOTAIS Eat4r.al T Financing Loco! Eat. Total Local Eat 'Tot.al Local Eat. Total LocalI Eat oto' -.oa E,t Total BILATERAL 77.6 57.3 134.9 72.1 11.2.3 183 4 89.0 147.9; 236 9 96 9 133 1 23C 334 f 45 6 785.2 03A-Rra Iwatar Supply USAM0 - 520-U-.033A 6 4.6 - 4.9 4 9 - - 0.0 - - 0 0 0 0 9 5 9.5 D5A - R.ral San,tat. on U.SAID - 520-U-033A - 0.5 0.5 - 0.5 0.5 - 0.8 0.6 - - u (C C.0 1 6 1.6 ConstructionRu,s l Acceas-Labor Intanain- LSAID - 520-T-040 8.6 6.5 I5.3 - 12.8 12.8 - 10.9 10.9 -- 0 0 8.8 30 2 39.0 Rural -I USAri.ato151 -S52-T-038 2.6 0.8 3.4 3.0 3.0 6.0 5.0 5.0 10.0 5.0 5 0 20 c' 25.65 13 8 29.4 Rafc,aatati,n U.5AM - 520-T-037 21 - 0.8 0.8 - - 0.0 - - 0.0 - - 0 C' 0.0 0 6 0.8 #ai.tnm.neceRural Access Roada-Labor Int,o.*ine LISAID- 520-T-037 0.7 3.8 4 5 - 4.5 4.5 0.6 i.6 2.2 2.3 - 2 3 3 6 90 9 3.5 Lna...tockDenlopa.ent USAM10-520-7-034 - 1.9 1 9 - - 0 0 - - 0 0 - - 0 0 0 0 10 1 9 OU,arReforatato., USAID - 520-T-037 - 1.2 1.2 1.5 0.6 2.1 . 0.6 21 15 06 2- 45 30 T 7. echn,cal Sar.e.at USAM1 18.5 2 0 20.5 18.5 2.6 21 0 19.0 3.0 22 0 20 5 3 5 24 . 76 5 11 0 87 5 Crad.t.for Ba.ic Criams LSAID 29.9 2.0 21.9 19 9 2.0 21.9 22 0 3.0 25 0 24..5 3.5 28 0 86 3 10 5 96 8 Cred,t for Miscellaneoua Cropa USAW 20.0 3 9 13.9 10 0 4 0 14 0 10.3 4.5 14.6 10 5 5 0 25 5 40 6 17 4 58.2 Cr-dit for LinOatock LISAID 9.4 0.2 9 8 9.6 0 4 10 0 10.8 0 4 11.0 11 4 0.6 12 C, 42 0 26 42 6 Cred,t f.r 7-rgat, on USAID 1.9 1.9 3.8 2 0 14.0 16.0 3.0 2.0 5.0 3 v 12.0 150o 9 209 3989 SUBTOTAL; U54I0 71.8 30.0 101.8 64.5 49.2 113 7 72.0 31.6 103 6 78 30 2 106 Q 287 0 141 0428 0 toap.tal Eouipment (Rowoaenlt) Fro..o. - 1.2 1.2 - - 0 0 - - 0.0 - - C.' C, 12 1 2 ~na.ital Eq..pfent (Qs.qzalten&ngo) Franca - 15.8 1s 8 - 8.2 8.2 - 0 0 - - 0 C C. C' 24 0 24 0 Pu-nhaae of Eq.ip., rapair' ald apron. of Fort. Franca 3.1 5 7 8.8 - 4 7 4 7 - - 0.0 - - 0 0 3 1 10 4 13 5 Diratribut,ionEStd ntFay 07 28 . 79 93 1 4 7 9 9.3 1 4 7 9 9 3 4 9 26 5 31 4 OlatributbonStudy ~~~~~~~Franca- 1.6 1.6 - 2.8 1 8 - - 0.0 - - 0 0 0 0 3 6 3 5, L%EPAR - Rural 'WaterSupply Goreany -KFW - - 0 0 1 0 4.5 5.5 10 7.5 a.5 3 0 19 5 22.5 El Juta0allery(Chiaoy) Italy - - ~~~~ ~~~~~~- 7.5 ~~~0.0 7.5 - 7.5 7.5 - - 0 0 0 0 150 15 0I. SU.BTOTAL: Dthnar Bilateral 3.8 27.3 31.1 2 4 34.6 37 0 2 4 22.9 25 3 2 4 15 4 17 8 12 0 100 2111.2 "'S Health Ed.cati on U-AID-proposed - - 0.0 - - 0.0 - 3.0 3 0 - 30 3 0 0 0 60 8.0 Rural 'WaterS..PPIY (05A) USAID P,Foposad - - 0.0 - - 0.0 - 9.0 9.0 - 9.5 9.5 0 0 18s 18.5 Community De,.lopeant Projac~ta 1.5AID - Fropoaed 2.0 - 2.0 2 0 3.0 5.0 2 0 - 2.0 2 0 - 20 80 30 1. Eaquntla-S.S.baatian Vnezuela - Foposad - - 0.0 - - 0.0 2.9 13.9 26.8 2.2 10 4 12 6 5 2 24 3 294 'WallOrflling; (EWAGUJA) Java, Proposed - - 0 0 - - 0 0 2.0 6 4 8 4 2 8 84 11.2 4.8 1408 19 6 EaPanalon of Rural Priaary Care ItalY p roposad - - 0.0 - - 0.0 - 11.0 11 0 - 11 0 11.0 0 0 Z 0 22.0 l4ontuf.r 1rrigation Italy -propoasd - - 0.0 - 9.0 9.0 - 20.1 20.1 - 10 4 10 4 0 0 39.5 39.5 Ma-kating Support (INDEA) Italy - Fopoaad - - f).0 - 7.4 7 4 - 9.2 9.2 - 11.3 t:. 3 0 0 27 9' 27 9 Autopiota ai. Ecnl ItalY PFopoaed - - 0.0 1.5 5 0 6.5 4.8 11.2 1.5.9 4 8 11I.1 15 9 11 1 27 2 38.3 Conat. M4odesto Mendez Poptun Germany - Propopad - - 0.0 - - 0.0 2.4. 5.5 8 0 3 5 8.3 11.8 5 9 13 9 19.8 Rural Acceaa Roada-Alta 'Warapax (labor intan..) Gar.anY - Prop,owad - - 0.0 0.7 4.1 4.8 0.5 4.1 4.6 0.5 4.1 4 8 1.7 12 3 14.0 SU.BTOTA.LPrOpoaad 2.0 0.0 2.0 4.2 28.5 32.7 14.6 93.4 108.0 15 6 87.5 103.3 36 6 20104 245 0 SUpPPLER CFtEDYT - - 0.0 1.5 10.0 11.5 1.0 10.0 11.0 - - 0 0 2.5 200 22.5 Gas Turb,ne-6 S.,ppliersCredit - - 0.0 1.5 i0.0 11.5 1.0 10.0 11.0 - - 0 0 2.5 20.0 23 5 COMMECIALCFtWrTrFt 0.3 19.0 19.3 17.1 18.5 35.6 21.0 19.0 40.0 10 0 10.4 20.4 48 4 66 9 115.3 Eapanabon of MeatropolitanSysteo Commercial - 10.0 10.0 9.0 30.5 19.5 11.0 19.0 30.0 5 (1 5 5 i0.5 25.0 45 0 70.0 Expansion of Regional Talaphonas Comearcial 0.3 9.0 9.3 8.1 8.0 16.1 10.0 - 10.0 5 0 4.9 9.9 23 4 21 9 45.3 (gua_park.. kl) 18-Feb-89 Table 2.*11 I'll"n - Public "eCt"r Invetme Pro"" Page 5 of 6 (M Illion Quetzal.s) ---- Estcmated…---I I…------Progras,ed …------ T So ..rce 98 1969 1990 1991 D'ALS Fi,ancing T Local Eat. Trotal Local Ext Total Local Ext. otal Local Ext Tot.' L-om Ext -ota NOCrDIETUMINED FINANCINGC 6 0 0.0 6 0 13.9 3.2 17 1 32.3 117.8 150 1 47 6 217 6 265 2 048 3.38 6 438 4 I.l-poeart of Santo Tsas de Castilia not deterimind - - 0.0 - 0.0 - 16 6 16 6 - 10 0 10 0 266 ExpansionCueteaslo City (50.000 lines) C L' 26.6 not determned - - 0 0 - - 0.0 7.1 34.0 41.1 10 4 38 7 49 1 SystemExpansion (250,000 lines) 17 9. 72 7 90.2 not determined- - 0.0 - - 0.0 1.8 - 1.6 14.2 57 5 71 7 IC 1' 57 InternationalSerice 5 73.5 not determined - - 0.0 - - 0.0 - 2.1 2.1 Sante Maria-2 - 1.3 1.2 C' 0 3 4 3.4 not determind - - 0.0 - - 0.0 - - 0.0 6.7 27 Ri.o Baomo 0 33 7 6,' 270 33.7 not daterained - - 0.0 - - 0.0 1.6 2.4 4 0 8.0 12 0 20 0 stama iir 9 6 244 24 0 not determined - - 0.0 - - 0.0 6.3 45.3 51 6 1 1 53 9 55 S. Sobastian-LaEaparanca O 7 4 96;2 106.6 not deterained - - 0.0 - - 0.0 2.3 7.9 10 2 1 7 6 5 SubstatioviTra.- Line JutmaPa 8.12 4 0 14 4 16 4 not determined - - 0.0 - - 0.0 1.0 4.3 5 3 1 4 6 5 7 9 7 A 10 6 13.2 69 KY Subetatimnsa/linae not determind 6 0 - 6.0 13.9 2.6 16 7 12.2 4.6 16 6 4 1 3 6 7 7, 36 2' 1: 0 Operating Center 47.2 not determined - - 0.0 - 0 4 0.4 - 0.6 0 6 - 0 6 0 6 0 0 1 6 1 6 LOCAL FINANCIOING 263.6 0 0263 6 358.1 0.0 358.1 368.2 0.0 388.2 398 3 00 396 3 1408 2 0 01408.2 Conatri.ctio of Pre-priearySChool - 0.1 - 0.1 1.0 - I10 0.9 - 0 9 0 9 - 0 9 2 9 0 0 2 9 Conet. Other Urban Primary SchoolIs - 1.5 - 1 5 4.1 - 4 1 2.6 - 2 6 2 6 - 2 6 6 0 -' Conat of Middle Sh,ools. 1C 10 a - - 0 0 1.7 - 17 2.7 - 2 7 2.8 - 2 8 Lonat of Other Shools 7 2 0 0 7 2 - - 0 0 0 6 - 0.6 - - 0 0 - - 01 0c6 0 0 0.6 Construction IWnagement (Schools) - - - 0 0 2 4 - 2 4 1.6 - 1 6 1 6 - 1 6 6 0 Equippirg o-fHelth Cavtersand Poeta 5 0 S 6 - 1.6 - 18a 3.6 - 3 6 3.7 - 3 7 3.9 - Spec,ialzed Madica1 Care 3 9 1.20C 0 0 13 0 0.2 - 0.2 - - 0.0 - - 0.0 - - 0 0 1 2 0 0 0.2 aiseriinadMan-gaent of Construction - 1 9 - 1 9 1 0 . 1.0 - - 0 0 - - 0 0 2 9 0 0 2 9 Repair and Expansion of Hospitals - 0.3 - 0.3 0.2 - 0.2 0.5 - 0.5 0 5 - C 5 1.1 0' 0 1 Repair Regonal Hoepitel da Langerud 5 4 - 0.1 - 0.1 - - 0.0 - - 0.0 - - 0 0 02 ReconstructionRehabilitation Center 0 0 0 1 00 - 0.3 - 0.3 0.3 - 0.3 - - 0 0 - - 0.0 06 00 08o Construction and Repair of Health Faclities - 13.1 - 13 1 10.0 - 10.0 10.0 - 10 0 10.0 - 10 0 Othar Conservtion Works 43 1 0 0 43 1 - - 0.0 11 I 1.1 1.2 - 1.2 1.2 - 1.2 Lend Davelopsant 3 5 0.0 3.5 1.8 - 1.8 1.8 - 1.6 1.9 - 1 9 2.0 - 2 0 765 0.0 Other (ICTA) 7.5 0.2 - 0.2 0.2 - 0.2 0.2 - 0.2 0.3 - 0.3 0 9 0 0 0 9 Rehab /Conetr. Rural Roads-IV, CA-I riae - 0.3 - 0.3 0.8 - 0.6 0.9 - 0 9 0.6 - 0 6 2 6 0 0 2.6 Bridge Conat. La Jsai., Cabuz rV 1.0 - 1.0 0.2 - 0.2 - - 0 0 - Tourisae Access Roads 0.0 1.2 0 0 1.2 - - 0.0 1.1 - 1.1 1.1 - I11 1.2 - 1.2 3 4 0 0 Pro-fabrication bridge coqponents 3 4 - 0.3 - 0.3 0.5 - 0.5 0.5 - 0 5 0.5 - 0.5 1.85 C,onst Castillo-San Juan Gostuncaco. 0 0 1.6 - 0.2 - 0.2 1.0 - I10 - - 0 0 - - 0 0 1.2 0 0 ConstructionModular Wooder Bridges 1.2 - - - 0.0 - - 0.0 0.5 - 0.5 0.5 - 0.3 Access Roads-Quiche 1 0 0.0 1 0 0.6 - 0.6 0 6 - 0.6 0.9 - 0 9 0 9 - 0.9; Rote 16, Paln-ia-S.Jxse PF.inua 3 0 0 0 3 0 0.3 - 0.3 - - 0.0 3.7 - 3.7 - - 0.0 4 0 0.0 4.0 CA-1 Zaragoza-Coa lspa 0.3 - 0.3 - - 0.0 2.7 - 2.7 - - 0.0 3 0 0 0 3.0 Construction Lake iIan Road ~i - - 0.0 1.0 - 1.0 - - 0 0 - - 0.0 1 0 0 0 1.0 Constr.flaprov Access Roads ail;/Upspten - 1.5 - 1.5 2 4 - 2.4 1.8 - 1 6 1.6 - 1.6 Earth 7 1 0 0 7.1 0.6 - 0.6 1.0 - 1.0 1.0 - 1.0 1.2 - 1.2 4 0 0 0 4.0 (gua.v_park.ek1) 15-Feb-69 0 Table 2.11 u'' eco 1-oea-natset. -ogra Page 6 of 6 ---- Eat-ated --- I I------Prograed ------ Sourc of 1988 1989 1990 1992 r.. T T p-n-nn Local Ext. ot., Local Eat loa LocalI Eat ot., LocalI Ext ota Lnc- Ext c.te. SuPer fl/ech Seru /Tra.-'nq and Road In-entory -0.2 - 0.2 1 0 - 2 0 1 0 - 1 0 2 0 2 3 2 Rura A-ces Ro.e. 0 9 - 0 9 1.2 - 1 2 1 1 - 11 11 2 11 0 A 3 Bi.dges 0.6 - 0 6 1 4 - 1 4 1 0 - 1.0 1 0 - 1t 4 S c 4 0 PurChase,Of EQUip., repar and MP,o. of Port -- - 0.0 5.5 - 5.5 6 0 - 6.0 6 9 - 6 1 28 4 0 C 18 4 Reheb,litati on - - 0.0 1.0 - 1.0 - - 0 0 - - c: 10 0 0 1 0 Repair Aurora Tereinal 0.1 - 0.1 0.5 - 0.5 0.5 - 0.5 0 5 - D 1 6 0 0 1 6 Dra.nage andlspr-eeent Paten 0.4 - 0 4 -- 0 0 - - 0" - - 00 0 4 0 0 0 4 Rtesa..Ru...ay-Anrore 2.5 - 2.5 0.7 - 0.7 - - 0.0 - - QC 32 0 0 3.2 Rura Water Supply 1 7 - 1.7 1.6 - 1.8 10 - 1 9 2 0 - 21 7 4 00c 7 4 Rural Sanitation 0.2 - 0.2 0.2 - 0.2 03 - 0.3 0.3 - 035 0:1 I 0 Modernzatio of Telegraph Systee - 1.0 - 1.0 1.3 - 1 3 1 4 - 1 4 1 5 - I 5, 1 2 0 0 5 2 Construction Post chd Telegraph,Dfficea - 0 3 - 0.3 0.0 - 0.8 0a8 - 0 a 0 6 - 0 6 2 ' 0 0 2 7 Supe.- alec and Technical Ser-cs- 1 7 - 1 7 6.0 - 6 0 9 0 - 9.0 9.0 - 1 2.5 0 C 25' E.pas-cn of Eartls Station - - 0.0 7.2 - 7.1 - - 0 0 - - 0 7 1 0 0 7 1 Other Imroveseetstto Regional\RuralSystee - - - 0 0 1.2 - 1.2 - - 0.0 - - 0 0~ 1.2 C0 1.2 fE-rgenY Wo-ke ((aJATE,) 8.0 - 8.0 8 0 - 6 0 100 - 10 0 10.0 le100 360 00C 36 0 Other (WUATE.) 0.1 - 0.1 3 9 - 3 9 4.0 - 4 0 5 0 - 50 130c 00C 13 0 Aguacapa 1 4 - 1 4 - - 0 0 - 0 - - 0 0 114 cC 1 4 Guetesur-Guoet norte 0.2 - 0.2 0.2 - 0.2 - - 00 - 0C 4 00c 104 Coaetesala-El S.leader 38a 3 8 0.5 - 0 5 - - 00 - 0 4 2 c 4 3 Substationaf0istributionNot Work - 5.3 - 5.3 12.2 - 12 2 24.3 - 24.3 24.:1 24 2 65 1 0 C 85 9 Other 4.5 - 4.5 9.2 - 9.2 9 7 - 9 7 9.7 - 9 7 3.31 0 0 3.11 Protecti- of Rice Basins- 0.7 - 0.7 1.3 - 1 3 1.3 - 1 3 1 3 - 13 A45 00 4 6 Repair and IepronementHlydroplants.- - - 0.0 0.8 - 0.8 0 8 - 0 8 0.8 - 0 8 2 4 0 0 2 4 Other Dist-ibution 21.3 - 21 3 23.0 - 23 0 9 3 - 9.3 0 4 - 0 4 540 0 0 Sea EstergencyPrograms 2.0 - 2.0 2.0 - 2 0 2 0 - 2 0 2.0 - 2 0 6 0 00C 80 Baaic lousingQlo-s-ngr.d,t) - 1':4 - 1.4 18.0 - 18 0 2230 - M30 25 0 - 25 0 764 C'C 7654 0 Middle In,om Housin-q cn Credit) - 23.3 - 23 3 36.0 - 36 0 48.0 - 48 0 45.0 - 45 0 152 3 0 C 152 3 ' Urban Streata 3.5 3.5 4.3 - 4.3 4.0 - 4 0 4 0 40 15i8 0 0 :158 Other Inneatments, 11 9 - 11 9 13 4 - 13 4 15 0 - 15.0 166a 168 5 71 0 0 5'1I Ministry of Defengse 31 7 - 3;,.7 34 7 - 34 7 35 0 - 35 0 36.0 - 36 0 !374 0 0 137 4 Ministry of Interor., 4.2 - 4.2 3.6 - 3 6 4.2 - 4.2 4 4 - 4 4 164 0 0 18 4 M. of Labor (Conat. of Recrea.tionCenters) - 0.5 - 0.5 1.5 - 1.5 1.5 - 1.5 1 6 - 1 6 5 1 0 C S I M of Public Works (Const. of Public Buildings) - 3.0 - 3.0 5.8 - 5.8 8 0 - 8 0 2.0 - 2.0 26 8 0 0 16.8 M of Public Worka (MWg Building Mbterils) - 0.5 - 0.5 0.6 - 0 6 0 6 - 0.6 0.6 - 0 6 123 0 0 2 3 Ministry of En-rgy and Mines 2.5 - 2.5 4.5 - 4.5 5 0 - 5 0 6 0 - 6 0 160 00D 10i M ol Cultire and Soorts.(Rest. of Bu Id IMonum - 4 8 - 4.8 5 3 - 5 3 5.0 - 5 0 4 6 - 4 6 19 7 0 0 19 7 Mocf Culture and Sports (Sport Facilities) - 4.7 - 4.7 6.1 - 6 1 4.1 - 4.1 3.9 3 9 16.6 0 0 18.8 Itnicipalities (udgeted/OS) 78.1 - 78.1 68.9 - 94 9 115.2 - 115.2 138 7 - 136 7 428 9 0 0 428 9 TOYTALEXrERNAL FIN4AMINC 139 4 287.6 407.0 243.9 565.0 808.9 289 9 693.1 983.0 298 7 782 4 108'.1 971 9 2308 13280 0 TOTAL DOMETIC F13N81C1WC 263.6 0.0 263.6 359.1 0.0 388 1 308.2 0.0 388.2 39B.3 0.0 398 3 1408 2 0 0 1400.2 TOrTAkLRELIC INVESTMENT 403.0 267.6 670 6 802.0 565.0 1167.0 678.1 893.1 1371.2 697 0 782 4 1479 4 2380 1 2308 2 4688.2 (gupek .kl)15-Feb-89 - 150 - Table 3.1 Government Expenditureson Agriculture, 1980 Country per hectare of cropland per person employed (current US$/hectare) in agriculture (current USS/person) Argentina 9 279 Bolivia 181 136 Brazil 169 485 Chile 163 393 Colombia 195 377 Costa Rica 119 143 Guatemala 18.7 85.1 Mexico 296 663 Peru 177 137 Venezuela 538 1,004 United States 244 9,412 Source: Governent Expenditureson Agriculture and Agricultural Growth in Latin America, by Victor J. Elias, InternationalFood Policy Research Institute 1975-85, October 1985. - 151 - Table 3.2 GUATENALA PowerSector Investment Review harketInforaation HistoricalandForecast Jnformation 1982 1584 1987 1988 1990 1992 1994 1996 1997 1/ 1/ 1/ 1.ENERGY SALES (6h0) INDE'sDirect Sales 204 215 286 319 397 499 675 910 1046 EE6SA'sSales 934 974 1215 1288 1423 1559 1669 1798 1854 Salesby Municipalities 2/ 2/ 7B 85 101 120 142 169 194 TOTALSALES 1138 1189 1579 1692 1921 2178 2486 2877 3084 AnnualRate of GroNth X 31 2.2 9.9 7.2 6.6 6.5 6.8 7.6 7.2 2.ENERGY REQUIREMENTS (OWh) TotalSales 1139 1139 1579 :692 1921 2178 2486 2877 3084 EnergyLosses 205 226 278 334 380 430 470 548 588 NetGeneration 1343 1415 1857 2026 2301 2608 2956 3425 3672 EnergyLosses 2 4/ 15.3 16.0 15.0 16.5 16.5 16.5 15.9 16.0 16.0 PlantUses 47 42 42 45 52 59 67 77 93 GROSSGENERATION 1390 1457 1899 2071 2353 2667 3023 3502 3755 3.MAXIMUM DEMAND Gross6eneration 6Wh 1390 1457 1B85 2071 2353 2667 3023 3502 3755 LoadFactor % 58.6 58.6 56.9 58.0 58.0 58.0 58.5 59.5 58.5 MAXIMUMDEMAND MW 271 2B4 381 408 463 525 590 683 733 4.NUMBER OF CUS7OMERS (1000) INDEand Municipalities 14B 193 24' 260 307 345 383 421 440 EE6SA 245 265 305 317 341 365 399 414 428 TOTALCUSTOMERS 393 458 548 577 648 710 772 9'5 868 1.Actual data. 2. Includeden INDE's sales 3mound annualarauth with respect to previousperiod shown. : Enegy losses ui h respectto nitgeneration - 152 - Table 3.3 GUATEMALA PowerSector Investment Review GlobalCapacity balance (MWi INDE'sProposed Expansion Program 1988 1989 1990 1991 1992 1993 1994 19q9 1996 1997 …~~~~~ 1. NAXINUMDEMAND 408 435 463 493 525 554 590 636 683 733 2. AVAILABLERESOURCES 2.1Hydro Power 1/ Existingasof 1987: -Aguacapa 60 60 90 90 90 90 90 90 90 9u -Chigcp 280 280 280 280 280 280 280 28C 280 I" -OtherPlants 86 86 86 86 Bb 86 86 BO 80 80 SubtotalExisting 426 426 456 456 456 456 456 450 450 450 NewProjects -bobos 8 8 8 B 8 -SantaMaPia II 68 68 68 -ElPalmar 54 54 -Jocotan 40 40 SubtotalNew 8 8 76 170 170 TotalHydro Power 426 426 456 456 456 464 464 526 620 620 2.2Thermal Power Existingasof 1987 -EscuintlaSteam 1 30 30 30 30 30 30 30 30 3 -EscuintlaSteam 2 50 50 50 50 50 50 50 50 5d -OtherINDE Plants 74 74 74 74 74 74 '4 74 74 74 -Ladguna(EE6SA) 74 74 74 74 74 74 74 74 74 74 SubtotalExisting 148 228 228 22B 228 228 223 228 228 228 NewProjects -Gas6 .'3 33 3 33 33 33 33 i' -EscuintlaSteam 3 50 50 50 50 50 -GeothermalZunil 1 15 15 15 15 is15 SubtotalNew Projects 33 33 48 98 98 98 98 Retirements(Cumulative) 20 20 20 20 20 37 37 37 TotalThermal Power 140 228 241 241 256 306 306 289 289 289 AvailabilityFactor 1 65 6B 71 75 75 75 75 75 75 TotalFire Thereal 96 155 171 181 192 230 230 217 217 217 2.3Total Resources 522 581 627 o37 648 694 694 743 837 83' 3. CAPACITVBALANCE 3.1Available Resources 522 581 627 637 648 694 694 743 8'7 837 3.2Capacity Requirements 408 435 463 493 525 554 590 636 683 733 3.3Capacity Reserves 114 146 164 144 123 140 104 107 154 104 3.4Reserves in1 28.0 33.6 35.4 29.2 23.4 25.2 17.5 16.8 22.5 14.2 1/For 80Z hydrological probability (Dryyear) - 153 - Table 3.4 GUATE¢ALA PowerSector Investment Review GlobaiEnr-y Balance(EWh) IN2Es ?r^oeJExpansion Program 198E 196$ 1990i 1991 1992 1993 1994 1995 1996 199J 1. ENER6\REQUIREMENTS 2070 2209 2352 2504 266 2B39 3022 3260 3501 3755 2. AVAILABLERESOURCES 2.1Hydro Powser 1/ ExistingAxiuacapasas of 19871987: 238 238 238 238 238 238 238 238 238 23E -ChuXaY 1308 1308 1308 1308 1308 1308 1308 1308 I1NS 13~18 -OtherPlants 254 254 254 254 254 254 254 254 254 254 SubtotalExisting 180P 1800 1800 1800 iaoo 1800 1600 18OQ 1800 18CO NewProjects -Babos Sb 56 5b Sb 56 -SantaMaria 11 177 177 177 -ElPalear 180 180 -Jocotan 132 132 SubtotalNaw 56 5b 2'3 545 545 TotalHydra Power 180') 1800 1600 1800 1800 1856 1856 2033 2345 2345 2.2Thersal Power 21 Existingasof 1987 -EscuintlaSteam1 139 216 216 216 216 216 216 2!6 216 -EscuintlaSteam 331 362 362 362 362 362 362 362 362 -OtherINDE Flants 407 407 407 407 407 407 407 401 407 407 -Launa (EE6Si) 563 563 563 563 563 563 563 5bT 563 563 SubtotalE.istlng 97 144I0 1548 1548 154e 1548 154E I'4o 1548 154B NewProjects -6as6 165 165 165 165 165 165 165 165 -EscuintlaSteam 3" 350 350 35' 350 350 -GeothermalZunil 1 69 164 164 164 164 164 SubtotalNew Projects 165 165 254 679 679 bg9 679 675 RetiromentF(Cumulative) 79 79 79 79 79 160 160 160 TotalThermal Power 970 1440 1634 1634 1723 2148 2148 2067 2067 2067 AvailibilityFactor . 70 75 80 8 80 6O 80 80 80 80 TotalFire Thersal 679 1080 1307 1307 1378 1718 1718 1654 1654 1654 2.3Total Resources 2479 28B0 3107 3107 3178 3574 3574 36b. 3999 3999 3. ENER6YBALANCE 3.1 AvailableResources 2479 2B80 3107 3107 3178 3574 3574 3687 3999 3999 3.2 EnergyRequirements 2070 2209 2352 2"04 2666 2839 3022 3260 3501 3755 3. EnergyReserves 409 671 755 603 512 735 55' 427 498 241 3.4 ReservesinS 19.8 30.4 32.1 24.1 19.2 25.9 18.3 13.1 14.2 6.5 1/For 80X hydrological probability (Dryyear) 2/ Excludesgeneration during scheduled maintenance - 154 - Table 3.5 Power Plant Additions Capacity Cost INDE's Name and Type 14W US$ Mill. Program Gas Turbine No. 6 (Thermal 33.0 20.0 1990 Zunil 1 (Geothermal) 15.0 23.5 1992 Steam Unit No. 3 (Thermal) 50.0 69.0 1993 Rio Bobos (Hydro) 9.0 16.0 1993 Santa Maria 2 (Hydro) 68.0 90.0 1995 El Palmar (Hydro) 55.0 81.6 1996 Jocoton (Hydro) 40.0 120.0 1996 Serchil (Hydro) 80.0 240.0 1998 Geothermal 2 55.0 90.0 1999 Chulac (Hydro) 330.0 600.0 2001 Xalala (Hydro) 320.0 600.0 2003 Source: INDE Tahle A.6 Guatemala's Road Network (1988) (length in ki) Primary Secondary Tertiary Total Paved Unpaved Total Paved Unpaved Total Paved Unpaved Total Paved Unpaved Total National Roads (DCC) 3,100 - 3,100 - 8,295 8,296 - 1,115 1,115 3,100 9,410 12,510 Feedtr Roads (fYDEP) j/ ------832 832 - 832 832 Penetration Roads (INTA) V ------4,100 4,100 - 4,100 4,100 OthersJ ------3,000 3,000 - 3,000 3,000 TOTAL 3,100 - 3,100 - 8,295 8,295 - 9,047 9,047 3,100 17,342 20,442 )J In El Peten. V Integrated In agricultural developmentprograms. PJ Uostly earth tracks. Source: DGC Table 3.7 Ministry of Public Works Road Development Program Targets 1988 1986 1090 1991 1992 1993 1994 Investment Targets km of Tertiary Road Construction 411 612 455 375 330 25S 183 km of Road Str.ngtheningand Improvemnt, of which 465 263 298 253 304 355 408 Primary Roads 8 161 171 126 71 79 80 Secondary Roads 78 89 115 127 233 276 328 Tertiary Roads 363 13 12 - - - - km of Periodic Maintenance, of which 462 462 440 440 637 537 637 Contracted - - - - 137 137 137 Force Account 462 462 440 440 400 400 400 km of Road Paving 28 45 49 32 29 22 18 Equipment Productivity Taracts a% Availability (S of 220 annual working days) 76 76 76 80 80 80 80 Utilization (X of annual available working hours) 65 70 70 75 76 7S 76 Oranizastional Targets Unqualified maintenance personnel exponses/ total maintenance budget (X) a6 60 66 50 50 46 40 Introduction of MaintenanceManagment Systems (X) 26 35 50 76 100 100 lOO Per.onnel Training (No.), of which 938 991 993 1,000 1,040 1,070 1,116 Managers and Professionals 6 6 8 10 10 10 10 Technicians 40 40 46 50 66 60 70 Administrotive 70 76 70 70 76 80 85 Services 210 220 230 240 250 260 280 Foreman and Skilled Workers 600 640 630 630 650 660 890 Source: DCC and mission estimates July 1988 Table 3.8 CUATEKA'A WATERSUPPLY AND SANITATION SECTOR Whar SuFply al Snrqp Servce Lav1g in 1984 1Ji ftipl tiJn hrkwalf4ulation Tot Papdatian Piped Water Nth Nth Saf. Pipd WIter 1th Per Ehita GW (lwtry hMllon UWIdBebmIIw Semroe Ni tem WIter N11h1aw Imiudeb DISl et swer 190SIblar Aataulina (1986) 26.1 611 342 4.8 172 30.9 562 282 2,13D Ibilvis 2.7 412 412 3.S 92 6.2 222 13 540 hazil p5.5 781 3l1 W.1 521 132.6 70S 232 1.720 aOlle (19S5) 9.6 951 751 2.1 192 11.7 all 621 1.700 lla4bia 19.0 742 142 9.4 781 28.4 751 492 1.390 (beta RIca 1.3 010ICll 1.4 6l 2.S 4 2 1,190 IQklitca Reshblic 3.4 531 3r8 2.7 332 6.1 442 211 910 Etador (19S2) 4.3 75S 62S 4. 135S 9.1 452 342 1,15n5 El Salvador 2.3 651 4s 3.1 392 5.4 52 2 710 I- (kaatsla 3.2 562 472 4.5 6S 7.7 272 391 1.1601 Ibitt 1.4 362 362 4.0 - S.4 9U 9 320 I&xKkwas 1.6 02t SOS 2.6 381 4.2 41t 192 70D Jaica 1.2 832 a3 1.0 9(1 2.2 a6u 452 9,350 9n1co 53.0 59 592 23.8 SIx 76.8 571 41S 3,970 Mlcareu 1.8 672 33S 1.4 72 3.2 412 32 860 PIw 1.1 832 541 I.0 611 2.1 71S 2R8 I,98D Paraguay 1.3 462 46Z 2.0 9(4 3.3 241 l82 1.240 Pe-ru 12.2 672 532 6.0 20S 18.2 52W 36S 1,00 lbrtdd ad T.jT o 0.7 842 842 O.S 4I 1.2 671 Msa 7,150 tkomy 2.6 852 542 0.4 - 3.0 732 471 . lwainIa 14.3 781 Sl9 2.S 513 36.8 742 452 3.410 luW. 258.4 712 46S 118.5 422 376.3 622 322 QF3A2: %rid Ilve1upa3tt hpart 1986wIth pVpatattu fIigwe for mid-1984, utiess otlwndm *mtM. hiy cma.trt abwe one mUIlnm 1ls'i tto 1l;l.wJ.. W6rId flt Sectr Studles or Staff Appraisal ft*rts for eservicelevels. Wr9d flmk .Sucia!l dlcator Tables. "ricas, FLrf l Rkagal dk *bNIlizac"s de awwwe' abr11 1996. Table 3.9 O*XIAWA WIR SSUYTAM SM!AImNN M= Service Levels 1974Service levelo 19R4ServIce [ewis WRIM SOERME WK~~~MW %NE2WI. W1ithlbse Standpipes Wi0thli,se latrines WIth l;me StaIlpes 6Wthl &se ltrEis or Ciiiuect1o & I nd iv. (Cxct lams Cnct wls llm vllidul CiwnctImSt Sq*Ic ls Systems Syst 111* ---- ______. ___ __ . _ Omate1a Ct:y 51% 37% 61S 7n 72? N A. 642 14% (ler lIlrbi 382 212 14% N.A. 44" 2 33? 282 Aer.i-g. lIrlmn 44% 29% 26t 1% 56% 281 41? 22? rAmrvntrated I/ 22 112 N.A. £1? 272 Ila - 2A INsgwrsed N.A. N.A. N.A. N.A. _ 242 3_ Auvr."* IOural N.A. N.A. N.A. N.A. hZ 38? - 44z Cr(UUinry AvfrRG 18? 192 _ % 12? 212 5 192 I l/i hl hm1s *_firvItles wIth r Iu.ululs betwen lIN) wst 21M1).exrismidir Gjwuty l;rai.. Source: Wettr Supply snd Sousrng. Sect.r Study. World Bano. Flay 1983 Table 3.10 Selected Social Indicators Middle Income Latin American Countries Costa El Guatemala Chile Rica Colombia Ecuador Salvador Honduras Jamiaca Nicaragua Paraguay Pert GNPPer Capita (current USS) 940.0 1,310.0 1,590.0 1,220.0 1,040.0 850.0 780.0 960.0 830.0 1,000.,0 1,43Q.0 Population and Vital Statistics Population Growth Rate (%) 2.8 1.7 2.6 1.9 2.9 1.S 3.6 1.4 3.1 3.3 2.6 Life Expectancy at Birth 61.0 71.0 74.0 65.0 686.0 61.0 64.0 73.0 61.0 87.0 80.0 Total Population (millions) 8.4 12.5 2.7 29.5 9.9 4.9 4.7 2.3 3.5 3.9 20.7 Crude Birth Rate (per thous) 41.0 21.0 29.0 27.0 34.0 37.0 41.0 23.0 42.0 35.0 32.0 Crude Death Rate (per thous) 9.0 6.0 4.0 7.0 7.0 9.0 8.0 6.0 9.0 6.0 IC0 Infant Mortality Rate (per thous) 68.0 24.0 17.0 47.0 50.0 64.0 59.0 18.0 67.0 42.0 73.C Child Death Rate (per thous) 15.0 1.0 0.0 3.0 5.0 5.0 7.0 1.0 6.0 2.0 11.0 Food, Health and Nutrition Per Capita Supply of Calories (per day) 2,345.0 2,544.0 2,807.0 2,588.0 2,005.0 2,155.0 2,224.0 2,578.0 2,464.0 2.873.0 2,120.0 Pop. per Phyisician (per thous, 8.6 1.9 1.4 2.0 2.9 2.6 3.1 2.8 2.3 1.8 1.5 l Pop, per Nurse (per thous) 1.4 ------0.6 0.7 - Pop. per Hospitat Bed (per thous) 0.6 0.3 0.3 0.8 - - 0.8 0.3 0.4 - 0.6 U' Access to Safe Water (X of pop): Total 61.0 85.0 88.0 70.0 59.0 55.0 69.0 96.0 56.0 25.0 S2.0 l Urban 90.0 100.0 93.0 89.0 98.0 71.0 91.0 99.0 98.0 46.0 73.0 Rural 26.0 18.0 86.0 30.0 21.0 43.0 55.0 93.0 9.0 10.0 18.0 Education Enrollment Rates Primary 76.0 109.0 101.0 117.0 114.0 70.0 102.0 106.0 101.0 101.0 122.0 Secondary 17.0 69.0 41.0 50.0 66.0 24.0 36.0 58.0 39.0 31.0 65.0 Pupil-Teacher Ratio Primary 36.0 - 31.0 30.0 33.0 42.0 38.0 33.0 33.0 25.0 35.0 Secondary 15.0 - 17.0 20.0 16.0 24.0 26.0 29.0 27.0 - - Pupils Reac'Ning Grade 6 (m) 27.0 79.0 70.0 - 56.0 27.0 30.0 88.0 15.0 43.0 55.0 Adult Literacy 1/ 55.0 84.0 90.0 81.0 81.0 62.0 60.0 90.0 90.0 84.0 80.0 Other Energy Consumption per cap (Kg of oil equivalent) 176.0 726.0 534 0 755.0 720.0 186.0 201.0 954.0 259.0 281.0 543.r 1/ Basic Development Data, 1984. Literacy rate for Guatem la from Basic Education Sector Memorandum, 1986. Source: Social Indicators of Development, August 1987 and September 198.