ReportNo. 12313-GU Guatemala An Assessmentof Poverty Public Disclosure Authorized April 17, 1995 Country Department If Human ResourcesOperations Division Latin America and the Caribbean Regional Office U~~~~~ Public Disclosure Authorized #W:~~~~~~~~2;- V Public Disclosure Authorized j -*a I~~~~~~~~~~~~~~~~~~~T~4 Public Disclosure Authorized Currency Equivalents (as of December 14, 1994) Currency Unit = Quetzal (Q) US$ 1.00 = Q 5.78 Fiscal Year January-December GUATEMALA: AN ASSESSMENT OF POVERTY LIST OF ABBREVIATIONS AND ACRONYMS ARI - Acute Respiratory Infections AVANCSO - Association for the Advance of the Social Sciences (Asociaci6npara el Avance de las Ciencias Sociales en Guatemala) BANDESA - National Bank for Agricultural Development (Banco Nacional para el Desarrollo Agriculo) BOG - Bank of Guatemala CACM - Central American Common Market CEPAL - Economic Commissionfor Latin America and the Caribbean (UN) CDUR - Urban and Rural Development Councils (Consejos de Desarrollo Urbano y Rural) CG - Central Government CISMA - Center for Mayan Social Research (Centro de Investigaci6nSocial Maya) DIGEBOS - National Extension Service--Forestry (Direcci6n General de Bosques) DIGEPA - Project Support Office (Ministry of Education) (Direcci6n General de Proyectos de Apoyo) DIGESA - National Extension Service--Agriculture DIGESEPE - National Extension Service--Livestock DTP - Department of Technical Planning ENSD - National Socio-Demographic Household Survey (Encuesta Nacional Sociodemografica) FAFIDESS - National Financial ConsultingFoundation for Developmentand Social Service Institutions (Fundaci6nde Asesoria Financiera a Institucionesde Desarrollo y Servicio Social) FECOAR - Federation of Regional Farming Cooperatives (Federaci6nde CooperativasAgricolas Regionales) FIS - Social Investment Fund (Fondo de Inversi6n Social) FOGUAVI - National Housing Fund (Fondo Guatemaltecopara la Vivienda) FONAPAZ - National Fund for Peace (Fondo Nacional para la Paz) FONATIERRA - National Fund for AgriculturalLands (Fondo Nacional de la Tierra) FSDC - Community Development Fund (Fondo de Solidaridadpara el Desarrollo Comunitario) FUNDACEDI - National Education and Integral DevelopmentFoundation (Fundaci6npara la Educaci6n y el Desarrollo Integral) FUNDESA - National Foundation for GuatemalanDevelopment (Fundaci6npara el Desarrollo de Guatemala) GAiT - General Agreement on Trade and Tariffs HC - Community Daycare Centers (Hogares Comunitarios) ICTA - National Agricultural Research Institute IDB - Inter-American Development Bank IFAD - InternationalFund for AgriculturalDevelopment IGSS - GuatemalanInstitute of Social Security (Instituto Guatemaltecode Seguridad Social) HICA - Cooperative Institute for Agriculture (Instituto de Cooperaci6npara la Agricultura) INE - National Statistics Institute (Instituto Nacional de Estadistica) INTA - National Institute for Agrarian Reform (Instituto Nacional de Transformaci6nAgraria) ISI - Industrialization Strategy Institute LCPE - Local Currency Price Equivalent MNIDES - Ministry of Development (Ministeriode Desarrollo) MOE - Ministry of Education MOF - Ministry of Finance MOH - Ministry of Health MSPAS - Ministry of Public Health and Welfare (Ministeriode Salud Publica y AsistenciaSocial) NFPS - Non-Financial Public Sector NGOs - Non-Government Organizations NTBs - Non-Tariff Barriers OECD - Organizationfor Economic Cooperationand Development OPS - Panamerican Health Office (Oficina Panamericanade Salud) PAHO - Pan-American Health Organization PANE - School Food and Nutrition Program (Programa de Alimentaci6ny Nutrici6n Escolar) PLADES - Action Plan for Social Developmentof Guatemala POAs - Annual Operation Plans PREN - National Reorganization Program PRES - Short Run Program of Economic and Social Adjustment PROGETTAPS - TechnologyGeneration and Transfer and Seed Production Program PVOs - Private Voluntary Organizations SEGEPLAN - National Planning Secretariat (SecretarfaGeneral del Consejo Nacional de Planificaci6n Econ6mica) SIMME - Commissionto Support Microenterprise (Comisi6nNacional para el Fomento de la Microempresay PequefiaEmpresa) UNICEF - United Nations Children's Fund USAID - United States Agency for InternationalDevelopment The Poverty Assessmentis intendedto stimulatedialogue with the Government and other sectors on a poverty alleviationstrategy for Guatemala. It is also intendedto complementBank operationsand sectorwork. This report was preparedby ClaireLucas under the guidanceof Mr. John Newman with inputs from ClaudioSapelli and GeorgeMonserrat (Macroeconomic Policy), Dominiquevan de Walle,Harry Patrinos,and HaeduckLee (PovertyProfile) Zafiris Tzannatosand AllesandroCigno (LaborMarket), Madalena dos Santos and Luis Crouch (Education),Ted Downingand ElizabethKatz (Agriculture),Christina Wood and Diane Steele. AlexPanagides participated in many stages of data analysisand report writing. The peer reviewerswere HelenaRibe, Dominiquevan de Walle,Theresa P. Jones and Karen Lashmnan.The report also benefitedfrom the commentsof Kye Woo Lee and Eduardo Velez. Bill Wood, KevinRost and VickiMacintyre provided editorial assistance. BarbaraDiallo, CarmenAlcantara and MariaColchao provided computing and formating support. The DepartmentDirector was Mr. EdilbertoL. Segura(LA2DR). 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IMPLEMENTINGA POVERTYALLEVIATION STRATEGY ................................................... 46 (1) Immediate decisions .................................................. 46 (2) Decisions in the nearfuture ................................................... 47 TABLES Table 1.1: Regional Population and Poverty Distribution .3 Table 1.2 Urban and Rural Poverty Distribution .4 Table 13: Regional Distribution of Poverty .5 Table 1.4: Headcount Poverty Rates .6 Table 1.5 Average School Completion and Illiteracy Rates .................................. ,.6 Table 1.6: The Marginal Effect of Different Variables on the Probability of Being Poor .8 Table 1.7: Headcount Poverty Rates .9 Table 1.8: Sources of Income .10 Table 1.9: Distribution of Family Consumption Expenditures and Budget Share by Poverty Group 10 Table 1.10: Gini Index of Income Inequality.12 Table 1.11: Distribution of Income and Consumption.12 Table 3. 1: Nominal and Real Effective Exchange Rate.19 Table 5. 1: Water & Sanitation and Electricity Coverage, 1989.30 Table 5.2: Regional Variation in Health Indicators andPoverty.31 Table 5.3: Regional Variations in enrollment and Poverty.32 Table 5.4: Illiteracy by Region (%) . .. 32 Table 5.5 MOE Regional Expenditures and Poverty Headcount .36 FIGURES Figure 3.1: Real Agriculture GDP per Capita.16 Figure 3.2: Real Health & Education Public Expenditures 21 Figure 5. 1: Per Capita Health Expenditure and Urbanization by Region.35 ANNEXES ANNEX I: Description of Data and the Measurement of Poverty ANNEX II: Estimated Poverty Levels from other Studies ANNEX III: