Guatemala Poverty Assessment Public Disclosure Authorized Authorized Disclosure Disclosure Public Public Good Performance at Low Levels
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Report No. 43920-GT Report No. 43920-GT Guatemala Poverty Assessment Public Disclosure Authorized Public Disclosure Authorized Good Performance at Low Levels March 18, 2009 Central America Department Poverty Reduction and Economic Management Unit Latin America and the Caribbean Region Guatemala Assessment Poverty Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank Table of Contents ACKNOWLEDGMENTS....................................................................................................v EXECUTIVE SUMMARY............................................................................................... vii An Improvement in The Rate of Change in Poverty and Social Indicators ...................... vii Benchmarking .......................................................................................................................... ix Education, Health and Social Protection ............................................................................... xi Improving Wellbeing Through a Conditional Cash Transfer Program............................ xii Income Generation and Poverty Reduction ........................................................................ xiv Vulnerability............................................................................................................................ xv Conclusions............................................................................................................................. xvi PART I ASSESSING POVERTY LEVELS, CHANGES OVER TIME AND BENCHMARKING............................................................................................................ 1 Chapter 1. INTRODUCTION...................................................................................... 3 Chapter 2. POVERTY EVOLUTION AND DISTRIBUTION OVER TIME............ 7 Poverty Profile........................................................................................................................... 8 Non Monetary Wellbeing Indicators..................................................................................... 14 Urban and Rural Population Shifts: Growth, Migration and Classification .................... 15 Growth and Inequality ...........................................................................................................16 Correlates of Poverty .............................................................................................................. 17 Chapter 3. BENCHMARKING GUATEMALA’S PERFORMANCE IN POVERTY AND SOCIAL INDICATORS ......................................................................................... 21 Trends in Human Development Index .................................................................................. 22 Benchmarking Approach ....................................................................................................... 23 Benchmarking Performance in Reducing Poverty .............................................................. 24 Benchmarking Performance in Reducing Inequality .......................................................... 26 Benchmarking Performance in Improving Educational Levels ......................................... 27 Benchmarking Performance in Improving Health and Nutrition...................................... 29 Benchmarking Performance in Social Infrastructure ......................................................... 31 Benchmarking Key Contextual Variables ............................................................................ 31 PART II SOCIAL PROGRAMS AND THE POTENTIAL IMPACT OF CONDITIONAL CASH TRANSFERS ON POVERTY................................................. 35 Chapter 4. SOCIAL PROGRAMS ............................................................................. 37 Public Expenditure ................................................................................................................. 38 Coverage and Incidence of Social Programs and Private Consumption ........................... 40 iii Education ................................................................................................................................. 47 Health ....................................................................................................................................... 55 Social Protection...................................................................................................................... 58 Conclusions.............................................................................................................................. 61 Chapter 5. CONDITIONAL CASH TRANSFERS................................................... 63 CCT Programs: Are They Appropriate for Guatemala?.................................................... 64 Relevant Issues For a CCT Program in Guatemala ............................................................ 66 Expected Impact of a CCT Program: an Ex-ante Evaluation ............................................ 69 Results of the Simulation of a National Program................................................................. 71 Results of the Simulation of Program in the Poorest Department ..................................... 75 Results of the Simulation of Program at the Municipal Level............................................ 77 Summary of Findings.............................................................................................................. 79 PART III INCOME GENERATION, SHOCKS AND VULNERABILITIES............ 81 Chapter 6. INCOME GENERATION, POVERTY REDUCTION AND LESSONS FROM REGIONAL CONTRASTS................................................................................. 83 Evolution of Households’ Sources of Resources................................................................... 84 Evolution of Labor Market and Productivity ...................................................................... 92 Improving The Trend: Focus on Bottlenecks to Productivity ............................................ 98 Regional Contrasts in Poverty Evolution............................................................................ 100 Chapter 7. SHOCKS AND VULNERABILITY ...................................................... 107 Hurricane Stan ...................................................................................................................... 108 Remittances............................................................................................................................ 109 Food Prices............................................................................................................................. 111 Crime and Violence in Guatemala....................................................................................... 112 Conclusions............................................................................................................................ 115 BIBLIOGRAPHY........................................................................................................... 117 iv ACKNOWLEDGMENTS This report was prepared by a team led by Carlos Sobrado (Economist, LCSPP) and John Newman (Lead Economist, LCSPP) and comprising Facundo Cuevas (LCSPP) and Anna Fruttero (LCSPP) under the overall supervision of J. Humberto Lopez (LCSPR) and Jaime Saavedra (LCSPP) and Jane Armitage (Previous Country Director, LCC2C), with collaboration provided by Rafael Dix Carneiro (LCSPP), Manuel Salazar (LCSHS), Waleska Garcia-Corzo (LCSPE), Prem Sangraula (DECRG), Shaohua Chen (DECRG), Joao Pedro Azevedo (LCSPP), Ezequiel Molina (LCSPP) and Jose R. Molinas Vega (LCSPP). Written comments were received from the peer reviewers, Eduardo Somensatto (Adviser LCSPE) and Cornelia Tesliuc (Social Protection Specialist LCSHS), Kinnon Scott (Senior Economist DECRG), Eric Swanson (Program Manager, DECDG) and Ken Simler (Senior Economist, PRMPR). Production assistance was provided, Anne Pillay (LCSPP), Fernanda Luchine (LCSPP), Liliana Pena and Lucy Bravo (LCSPP). For two chapters the principal authors in the PA are as follows: Chapter 5. Conditional Cash Transfers: Anna Fruttero Chapter 6. Income and Regional Differences: Facundo Cuevas The PA team would like to thank the Guatemalan institutions for their support in facilitating data and information and participating in the initial LSMS analysis, especially the MECOVI Group at the National Statistics Institute (Carlos Mancía Chúa –Director-, Nestor Mauricio Guerra, Erick Raul Chuquiej, Tomas Barrientos, Marco Antonio Martinez, Oscar Poron, Cesar Calderon and Mynor Flores Folgar), the Consejo de Cohesión Social (Maria Castro), the National Institute of Meteorology and Seismology (INSIVUMEH), the UNDP (Pamela Escobar, Luis Velasquez and Karin Slowing Umaña), Rafael Landivar University (Tomas Rosada and Juan Fernando Diaz) and SEGEPLAN (Shorjand Benedicto Estrada). v vi EXECUTIVE SUMMARY For many years, Guatemalan economy and society have been characterized by very high levels of poverty, lagging social indicators and extreme inequality. Indeed, virtually every study of the country’s situation during the 1970’s, 1980’s and 1990s noted that, among Latin American and Caribbean countries, Guatemala’s level of poverty and social indicators surpassed only those of Haiti. Guatemala has maintained macroeconomic stability, but with levels of tax revenue and public expenditure so low that many observers have questioned