Report No. 19617-GU
Guatemala
Expenditure Reform in a Post-Conflict Country
February 4, 2000
Central America Department
Latin America and the Caribbean Region
Document of the World Bank


CURRENCY EQUIVALENTS
Currency Unit: Quetzal (Q)
US$1.0 = Q7.90 (February 3, 2000)
GOVERNMENT FISCAL YEAR
January 1 to December 31
GLOSSARY OF MAIN ACRONYMS AND ABBREVIATIONS
BANVI     National Housing Bank                    INDE       National Electrification Institute
BOG       Central Bank of Guatemala               INDECA      National Inst. For Agrarian Commercialization
CABEI     Central American Bank for Economic      INFOM       Municipal Development Institute
Integration                             ]USI        Impuesto Unico Sobre Inmuebles
CG        Consultative Group                       LSMS       Living Standards Measurement Survey
CGO       Comptroller General's Office             MINUGUA United Nations Mission in Guatemala
CIACI     Inter-institutional Commission for the   MOE        Ministry of Education
Facilitation of Int. Cooperation        MIFIN       Ministry of Finance
CIEN      National Center for Research and Studies  MOH/MSPAS Ministry of Health/Ministerio de
COEDUCAS Education Committees                                   Salud Pfiblica y Asistencia Social
CONALFA National Literacy Commission               MTEF       Medium Term Expenditure Framework
CONAMA National Environmental Commission           NFPS       Non Financial Public Sector
COPECAS Permanent Commission for Coordinating      NGO        Non-Governmental Organization
Water and Sanitation                    ONSEC      National Office of Civil Service
CORFINA National Finance Corporation               PAHO       Pan American Health Organization
COVIAL    Unidad Ejecutora de Conservaci6n Vial    PHC        Primary Health Care
CSC       Civil Service Commission                 PIP        Peace Investment Plan
DC        Development Councils                     PIR        Public Investment Review
DTP       Technical Budget Directorate             POA        Annual Operational Plan
EEGSA     Electricity Enterprise of Guatemala      PRONADE National Program for Education Self-
EMPAGUA Guatemala City Municipal Water                        Management
Corporation                            SAT         Superintendency of Tax Administration
FEGUA     Guatemalan Railroad Cmpany               SCR        Strengthening of Civil Rule
FIS/SIF   Fondo de Inversi6n Social/Social         SEA        Socioeconomic and Agrarian Issues Accord
Investment Fund                         SEGEPLAN Economic Planning Secretariat
FODIGUA Guatemalan Fund for Indigenous Development SIAF/SAG   Integrated Financial Management System
FOGUAVI Guatemalan Housing Fund                               Government Auditing System
FONAPAZ National Peace Fund                        TELGUA     Guatemalan Telecommunications Enterprise
FSDC      Solidarity and Community Development Fund UBN       Unsatisfied Basic Needs
GIS       Geographic Information System            UEP        Project Execution Unit
GOG       Government of Guatemala                  UNDP       United Nations Development Programme
GUATEL    Guatemalan Telecommunications Company    UNICEF     United Nations International Children's
EAHS      Integrated Attention to the Health System           Education Fund
IDB       Inter-American Development Bank          USAID      United States Agency for International
EGE       National Statistics Institute                      Development
IFMS      Integrated Financial Management System   VAT        Value Added Tax
IGSS      Guatemalan Social Security Institute     ZONAPAZ Peace Zone
IMF       International Monetary Fund
Managers and Staff Responsible
Vice President    Mr. David de Ferranti
Director PREM   Mr. Guillermo Perry
Director CMU     :Ms. Donna Dowsett-Coirolo
Lead Economist Mr. Ian Bannon
Task Manager     aMr. Josn R. L6pez-Calix


TABLE OF CONTENTS
RESUMEN EJECUTIVO
EXECUTIVE SUMMARY
INTRODUCTION......................................................1
Chapter 1: POST-CONFLICT EXPENDITURE TRENDS AND CHALLENGES............2
A      Overview........................................................ 2
B      Trends in Public Finance During the Pre-Peace Period.. .........................3
C      Post-Conflict Spending Trends..............4...........          ..............4
D      The Main Challenges of an Incomplete Agenda.............................9
Chapter II: PROGRESS ON PUBLIC SECTOR MODERNIZATION............................. 19
A      The Origins of Reform                                .......................9...... ...............19
B      Early Benefits from Public Sector Modernization   ..................... ..... 21
C      Remaining Challenges in Implementation of the IFMS               ................... 23
D      The Missing Link of Public Sector Modernization: Civil Service Reform.................. 26
E      Decentralization through Deconcentration and Municipalization  ................29
F      The Need for Improved Governance                          .................................... 31
Chapter III: MONITORING FISCAL REFORM: A REVIEW OF PEACE TARGETS ...33
A      The Rationale of Peace Benchmarks                         ....................................33
B      Overview of Progress.............................................. 35
C      Rescheduling Peace Targets: Some Considerations    .................... .....40
D      The Need for Complementary Performance Indicators        ........     ...............42
TECHNICAL ANNEXES
A      Guatemala: Projections of the Tax Revenue..............................      46
B      The Growth-Fiscal Deficit Gap................................. 47
C      Factors Present Prior to Fiscal Stress...................................48
D      Contingent Liability Estimates for Several Countries    ..........     ..............49
E      IFMS Status and Best Practices in Public Financial Management...  ...................50
F      CABEI, 1DB and World Bank Loan Approval Procedure Delay ................................. 58
G      Progress Report on the Recommendations Made by the WB/ PIR 1997..................... 59
BIBLIOGRAPHY
STATISTICAL APPENDIX
TEXT TABLES
1.1    Changes in Capital and Current Expenditure Shares, Pre and Post-Adjustment............4
1.2    Unsatisfied Basic Needs (UBN), Human Development (HD) and Regional Distribution of
Public Expenditure................................................. 5
1.3    UBN, HD and Departmental Distribution of Public Expenditure in 1998.....................6
1.4    Budget Inflexibility ....... ...................................... 8
1.5    Fiscal Scenarios           .......................................  ...........10
1.6    Sustainability of Public Debt and Fiscal Adjustment  ................... .....1..... I
11.1   IFMS Performance Indicators                            ........................................ 22
111.1  Performance of Peace Monitoring Indicators   .....................     .........34
111.2  Average Cost of Reducing/Increasing 1% Point of Target............ .......................42
111.3  Revamping Performance Indicators for Social Expenditure Reform........  ............43


TEXT FIGURES
1.1     Capital Expenditure of Central Government.................        ..................3
1.2     Allocation of Budget Among Major Categories.............................4
1.3     Share of Social Funds in Public Investment   ....................................5
1.4     Contingent Government Liabilities for Bank Bailouts  .......................... 13
1.5     Domestic Debt Restructuring......................................... 14
11.1    Level of Budget Execution               ..........................................23
11.2    Budget Executed/Programmed          ........................................... 23
11.3   External Loans, Disbursement Flows...................................23
11.4    External Loans Procedures, by Selected Donor...............       ................24
11.5    Trends of CG Employment 1995-1998...          .........................   ......_.26
11.6    Composition of CG Employment 1995 - 1998 .............................26
11.7    Comparison of Earnings for Selected Private and Public Sector Jobs 1998.................27
111.1   Infant Mortality, by Department, 1996..... ..........      ..........  .........39
111.2   Maternal Mortality, by Department, 1996...................       ..................39
111.3   Tax Ratio Gap .............             .......................................... 40
111.4  Illiteracy Gap................................ .....                     ......41
111.5   Three-Years Schooling Gross Coverage Gap..................................41
111.6  Infant Mortality Gap ..................................              .................. 42
111.7   Education attainment Profiles for Ages 15 to 19, by Economic Group.....  ...........44
TEXT BOXES
I.1     Selected Peace Accord Targets.    .......................              .................2
1.2     Mitch: External Financing Reconstruction Needs...............     .................7
1.3    Guatemala Privatization Program ........................................... 9
1.4     The Fiscal Risk Matrix....                              ......................................... 12
1.5     The Medium Term Expenditure Framework: South Africa and the UK.......................... 16
11.1    The New Regulatory Framework.               ...................................... 19
11.2    The First Steps of the IFMS      ..........................................21
11.3    The JMF Code on Fiscal Transparency.............               ........   .....25
111.1   The PRONADE System.............................................37
111.2   The Integrated Attention to the Health System.............................38
111.3   Main Statistical and Methodological Data Constraints....... .................. ...45
The Task Manager for this report is Jost R. L6pez-CALx (LCCGT). It is based on a series of missions to
Guatemala during November 1998-August 1999. It reflects joint collaborative efforts with the Government of
Guatemala (Peace Secretariat, Ministries of Finance, Education, Health, Communications. Transport and Public
Works, Energy, Bank of Guatemala. SEGEPLAN and the social funds), the Superintendencies of
Telecommunications, Energy, Banks and Tax Administration, the Fiscal Pact Commission, MINUGUA, and the
Peace Secretariat. Its main contributors are: Ricardo Tejada (Bank staff-statistical analysis); Maria del Carmen
Acefa, and Carlos Ral6n (consultants--education); Ligia Chinchilla (consultant-roads and health); Edgar
Barillas and Ricardo Valladares (consultants-health); Alberto Zidfliga, Sigfrido Lee and Manfredo Chocano
(consultants-social funds); Fernando Rojas (Bank staff-fiscal decentralization); Maria E  Anderson
(consultant-education); Carmen Urizar and Carlos Prera (consultants-energy and telecommunications); Jorge
Lavarreda (consultant-  housing); Peter Gregory and Maritza Ochoa (consultants-public employment):
Mauricio Funes (consultant-external debt); Rafael Lemus (consultant-fiscal spending and contingent
liabilities); Pablo Schneider (consultant-Mitch expenditure assessment). Other Bank staff that provided useful
iputs are: Ronald Myers (public sector reform); Guillermo Ruan (road specialist) and Juliana Weissman (social
funds specialist). Alberto Espejo and Mercedes DaCosta (IMF), Alex Segovia (MINUGUA), James Wesberry
(consultant-institutional issues), Osvaldo Albano (IFMS) and Jaime Carrera (rural issues) provided valuable
external contributions. Gabriela GonzAles, Annabella Lucas, Claudia Hemindez and Celeste Peralta provided
extraordinary editorial support. Bank Peer reviewers were. Anwar Shah, Vinaya Swaroop and Ana Maria
Arriagada.


RESUMEN EJECUTIVO
La firma de la paz en 1996 brindó a Guatemala una oportunidad única de redefinir su agenda de
desarrollo, aunque también implicó un reto crucial para la modernización de su sector público.
i.     Cuando se firmaron los Acuerdos de Paz en diciembre de 1996, Guatemala tuvo una oportunidad
única de revertir su viejo modelo de desarrollo que había conducido a la pobreza y exclusión de grandes
segmentos de la población. Los Acuerdos de Paz conllevaron no solamente el fin del conflicto armado,
sino además y más fundamentalmente, la redefinición de la agenda social y económica del país. La visión
de los Acuerdos de Paz es fundamentalmente la de una sociedad más próspera, incluyente e igualitaria.
Al mismo tiempo, el Gobierno comprendió que enfrentaba un tremendo reto para volver esta visión en
realidad. El Programa Económico y Social 1996-2000 del Gobierno estableció claramente una estrategia
para un mayor crecimiento económico y reducción de la pobreza. Ello requeriría de un marco
macroeconómico sólido, del financiamiento de los programas de paz manteniendo una posición fiscal
prudente, de la redefinición de la relación entre el sector privado y el público para apoyar un crecimiento
liderado por el sector privado, y de la modernización total del sector público de Guatemala. Este informe,
el tercero de una serie que ha acompañado los Acuerdos de Paz, analiza el marco macroeconómico, el
progreso en la reestructuración del gasto público, las reformas institucionales para la modernización del
sector público, y el avance en el cumplimiento de las metas de paz y sus retos pendientes.
El Gobierno comprendió desde el principio que la modernización del sector público sería clave para el
cumplimiento de los Acuerdos de Paz y de sus objetivos de desarrollo de largo plazo.
ii.    El Acuerdo sobre Asuntos Socioeconómicos y Agrarios (SEA) estableció la base para la
modernización del sector público y la reforma del gasto público. Adicionalmente a un marco
socioeconómico sano, se requería de reformas para ampliar la base tributaria, reorientar el gasto hacia
los sectores sociales y de infraestructura básica, reasignar el gasto público fuera de la Ciudad de
Guatemala y en beneficio de las comunidades rurales pobres (mayormente indígenas) e incrementar la
equidad y eficiencia en la provisión de servicios públicos.
Han habido avances considerables en varias áreas...
iii.   Guatemala ha logrado considerables avances en la reorientación del gasto y en la mejora de la
eficiencia del sector público. Estos esfuerzos han sido apoyados por medidas complementarias de
reducción de la deuda interna y por el programa de privatización del Gobierno. Los avances han sido
significativos en cuanto:
*  al incremento del gasto público de acuerdo con las metas fijadas en los Acuerdos;
+  a la mejora de la relación gasto de capital/corriente para revertir décadas de subinversión en la
infraestructura básica y social;
*  al incremento de la flexibilidad presupuestaria y la reorientación del gasto hacia sectores sociales
prioritarios: el gasto social y de infraestructura básica representa actualmente el 70 por ciento del
presupuesto y se focaliza en la educación pre-primaria y primaria, el uso de métodos preventivos y no
curativos para la salud, la vivienda mínima e infraestructura rural;
*  la delegación de la ejecución de la inversión social y de infraestructura básica a los fondos sociales y
la subcontratación con el sector privado;
*  al inicio de la desconcentración del gasto fuera de la Ciudad de Guatemala;
*  a la implementación exitosa del manejo de desastres naturales, tales como el huracán Mitch; y
*  al mayor esfuerzo de focalización de los recursos hacia grupos de mayor pobreza.


i
...las cuales necesitan ser sostenidas, pero la inestabilidad macroeconómica representa una amenaza
más inmediata.
iv.    Las reformas necesitan ser consolidadas y profundizadas, aunque se ha presentado un reto más
inmediato debido al empeoramiento del entorno económico externo y el debilitamiento de los balances
macroeconómicos fundamentales en 1999. La mayor vulnerabilidad es el resultado de una política fiscal
debilitada durante el proceso electoral, de políticas monetarias erráticas e inapropiadas y de continuos
fracasos en el fortalecimiento de la base tributaria. A su vez, estas condiciones están ligadas a las
debilidades del sistema financiero y de la posición externa. La privatización ha alimentado una ilusión
fiscal, contribuyendo al relajamiento de las políticas fiscales, mientras los pasivos fiscales contingentes
han crecido a consecuencia de un sistema financiero en dificultades.
Una pre-condición para el . sostenimiento de la paz es la reducción de la vulnerabilidad
macroeconómica...
V.     La necesidad de corregir los desbalances macroeconómicos que enfrentará la nueva
Administración a principios del año 2000 amenaza con desviar la atención de los retos pendientes de la
agenda de paz. Una de las prioridades a corto plazo es el fortalecimiento del manejo macroeconómico
para reducir la posibilidad de una crisis gemela, cambiaria y financiera. Protegiendo en lo posible a los
programas de paz durante la fase de ajuste, las políticas deberían pretender:
/ reducir los déficit fiscales y de cuenta corriente externa a niveles sostenibles - aproximadamente 1 y
3 por ciento del PIB;
/ mantener una política monetaria ajustada y estable, previniendo los amplios ciclos de expansión-
contracción que han caracterizado a los mercados crediticios recientemente;
/ reconstruir la posición de las reservas internacionales para respaldar plenamente la base monetaria;
/ mantener una política de tipo de cambio efectivo real neutral; y
/ reducir los pasivos fiscales contingentes y restablecer la confianza del público en la solvencia del
sistema financiero mediante el fortalecimiento de las regulaciones del sistema financiero, incluyendo
las recientes reformas a la ley de bancos y creación del seguro de depósitos, el cierre o fusión de las
instituciones insolventes y el establecimiento de fondos presupuestarios contingentes manejados con
criterios claros para proveer liquidez de emergencia.
...aunque también será esencial ampliar la base tributaria para la estabilidad macroeconómica y para
financiar la paz...
vi.    El doble reto de restablecer la estabilidad macroeconómica mientras se continúa con la agenda de
paz, puede lograrse únicamente con el fortalecimiento de la base tributaria. Un fracaso clave en el
proceso de paz ha sido la falta de avance significativo en el cumplimiento de la meta tributaria. La
experiencia de Guatemala sugiere que la nueva Administración debería actuar rápida, enérgicamente y en
consenso con el Pacto Fiscal en el campo de ingresos tributarios si ha de cumplir con la meta tributaria
reprogramada. Lograr este objetivo requerirá de una combinación de incrementos en las tasas
impositivas, una reducción de las exenciones tributarias, una administración más efectiva por parte de la
Superintendencia de Administración Tributaria (SAT), una reforma del código tributario y de los
procedimientos judiciales que tienen que ver con los casos de evasión impositiva, y la total erradicación
de las amnistías tributarias.


...además de reformas adicionales del gasto.
vi.    El avance de la reforma del gasto público ha sido substancial. Este logro debe ser sostenido y
profundizado, especialmente para:
mantener, a un nivel macro, un coeficiente mínimo (r) de gasto de capital con respecto a gasto
corriente de 0.55; lo cual a corto plazo requeriría de un estricto control del empleo del sector público,
exceptuando al sector educación ya que requiere más maestros para cumplir con los compromisos de
paz. Asimismo, a un nivel micro, se necesita una evaluación del coeficiente r sectorial apropiado para
los proyectos nuevos y existentes, cuestionando aquellos que no lo satisfacen;
destinar por lo menos 75 por ciento del gasto a la infraestructura básica y social;
utilizar los recursos futuros de privatización para, primero, cancelar la deuda pública (bonos) de corto
plazo (de menos de 6 meses) y/o los bonos indexados al dólar (de menos de 1 año) en su totalidad y,
segundo, para crear un fondo fideicomiso (similar a Panamá), cuyos intereses financiarían programas
de desarrollo de largo plazo con rendimientos económicos y sociales significativos y, de esa manera,
prevenir choques de liquidez en el mercado cambiario;
aumentar la relación deuda externa/interna a 2/1, mientras se reduce el tamaño y se amplían los plazos
de la deuda interna;
aprovechar las herramientas del SIAF-SAG para mejorar la reorientación del gasto hacia los más
pobres; considerando establecer metas mínimas de gasto sujetas a monitoreo, tales como: 60 por
ciento del gasto del Gobierno Central asignado fuera de la capital y 50 por ciento del gasto de los
fondos sociales hacia las regiones, departamentos, municipalidades y localidades más pobres; y
considerar la eliminación o fusión de los fondos sociales de bajo rendimiento - exceptuando los tres
más grandes, FIS, FONAPAZ, FSDC y tal vez, FOGUAVI y mejorar su grado de coordinación y
especialización por área y regiones.
La modernización de la administración financiera a través del Sistema Integrado de Administración
Financiera-Auditoría Gubernamental (SIAF-SAG) ha mejorado signficativamente la provisión de
servicios públicos.
viii.  El objetivo de la modernización del sector público ha sido mejorar su capacidad de proveer
servicios públicos en el combate a la pobreza y la mejoría de las condiciones sociales. El Gobierno
comprendió que sus esfuerzos tenían que empezar con la forma en que manejaba sus propias finanzas.
Por ello, adoptó un sistema integrado de administración financiera, no sólo para mejorar su eficacia y
eficiencia, sino también su transparencia. Después de tres años de implementación, los logros son
notables e incluyen:
*  la creación de un centro integrado de funciones básicas de una administración financiera:
presupuesto, contabilidad, tesorería, auditoría y adquisiciones;
*  un sistema contable presupuestario común en todos los ministerios e instituciones públicas;
*  un sistema contable centralizado - en base a efectivo y devengamiento - de acceso virtual apoyado
por fibra óptica y compatibilidad Y2K;
*  el uso de transferencias electrónicas de recursos para más del 50 por ciento de los pagos del sector
público, incluyendo la nómina salarial, eliminando así significativamente el uso de cheques;
*  procedimientos de pago mas expeditos y transparentes, reduciendo así los pasos a seguir, y el tiempo
y costo de las transacciones;
*  la creación de una base de datos única para toda transacción financiera, con acceso de internet abierto
a todo el público;


iv
*  la creación de nuevos procesos de auditoría y reducción de prácticas que permitían altos índices de
corrupción (es decir, cuentas múltiples, pagos discrecionales, proveedores fantasma y precios con
primas por pago tardío);
*  un sistema de adquisiciones nuevo y transparente que conduce a una reducción significativa de los
precios pagados a los proveedores;
*  la eliminación de atrasos (deuda flotante) en el plazo de pago a proveedores y de carestía de fondos
de contrapartida para proyectos externos;
*  el seguimiento a diario del manejo presupuestario por parte de los ministerios;
*  incrementos significativos en el porcentaje de ejecución presupuestaria anual por parte de los
ministerios: de menos del 50 por ciento a principios de los 1990s, a más del 90 por ciento
actualmente;
*  mejoras en la planificación presupuestaria y manejo de efectivo trimestrales;
*  la duplicación de los desembolsos de préstamos externos entre 1997 y 1998; y
*  la reducción a la mitad del tiempo requerido por el Congreso para el procesamiento y aprobación de
préstamos externos.
... pero el nuevo sistema debe ser consolidado y sostenido.
ix.    El SIAF-SAG ha tenido un comienzo prometedor, pero aún se requiere de un esfuerzo importante
para garantizar su consolidación y ampliación, así como el fortalecimiento de su marco legal e
institucional. Los esfuerzos pendientes requieren:
su ampliación horizontal para integrar a todos los ministerios, fondos sociales y mayoría de las
municipalidades; algunos fondos sociales siguen estando fuera del control presupuestario y de
auditoría por el Contralor;
/ la creación de una unidad de administración de deuda pública externa e interna en el Ministerio de
Finanzas, la cual debería absorber a la CIACI y la cooperación externa;
/ la integración del Sistema de Información Geográfica (SIG) de SEGEPLAN al SIAF, para así contar
con una herramienta única y actualizada de planificación y monitoreo de la inversión pública;
/  el desarrollo de un Programa de Gasto Público a Mediano Plazo y la adopción del Código de Buenas
Prácticas y Transparencia Fiscal del FMI, incluyendo las nuevas disposiciones contables y
presupuestarias relativas al manejo de los pasivos fiscales contingentes;
/ el apoyo a la modernización y autonomía de la Contraloría General de Cuentas;
/ el fortalecimiento de la base legal del sistema, por medio de la aprobación de las leyes del SIAF, de la
Contraloría General de Cuentas, de adquisiciones públicas y de probidad administrativa; y
/ la preservación de un equipo técnico nacional fuerte y profesional, mientras se amplía la capacidad
local para el uso del sistema, promoviendo inclusive la capacitación en el SIAF por las instituciones
públicas, asociaciones profesionales y universidades.
El servicio civil ha sido el eslabón perdido de la reforma del sector público...
x.     Aunque la reforma del servicio civil es una prioridad dentro de los Acuerdos de Paz, y es crítica
para el sostenimiento de la modernización del sector público en el mediano plazo, el Gobierno no ha
podido llevarla a cabo. Sin embargo, tomó algunas medidas para reestructurar el empleo y los salarios del
sector público de acuerdo con las prioridades de paz. El resultado de estas medidas fue:
* la significativa reestructuración del empleo del sector público, con la significativa reducción de
personal en tres ministerios - Comunicaciones y Transporte, Agricultura y Finanzas - compensada
por su incremento en dos ministerios vinculados a los acuerdos de paz: Educación y Gobernación.
* la reducción del empleo público en empresas asociadas al proceso de privatización.


v
*  una leve baja de la nómina salarial como proporción del gasto corriente, lo cual podría indicar alguna
mejora en la eficiencia del sector público. Sin embargo, es dificil confirmarla debido a información
inconsistente e incompleta respecto del empleo total del sector público y de los programas de
jubilación voluntaria.
*  la mejora de salarios y beneficios para el personal de la SAT y nueva Policía Nacional, aunque siguen
habiendo inconsistencias entre los salarios del sector público y los del sector privado, particularmente
en los puestos altos.
*  el incremento de la movilidad laboral en los niveles profesionales y gerenciales debido a la
multiplicación de contratos 029 (temporales).
... y debe ser tratado deforma integral
xi.    Estas medidas limitadas y ad hoc parecen haber contribuido a la mejora en la eficiencia y
flexibilidad del sector público, pero deben ser reforzadas como parte de un esfuerzo más integral y de
largo plazo de reforma del servicio civil. El éxito de la modernización del sector público debe ser
acompañado de un servicio civil moderno, eficiente y basado en mérito. La agenda mínima de reforma
del servicio civil tendría qu¿ considerar:
prontas acciones para la cancelación automática de posiciones vacantes, tan pronto sean completadas
las indemnizaciones de los trabajadores recientemente despedidos que aún están en la nómina;
enmiendas a la ley de servicio civil para crear una nueva carrera de servicio civil, reformando el
sistema de salarios del sector público, redefmiendo el papel de los sindicatos y modernizando los
procedimientos para tratar las disputas laborales, limitando así apelar a los tribunales laborales;
la transformación de la Junta Nacional del Servicio Civil a una Comisión del Servicio Civil
independiente, y el establecimiento de nuevos procedimientos para el reclutamiento, contratación,
promoción y capacitación del empleado público;
la limitación de las funciones de ONSEC a un papel normativo;
la no-definición de una estructura de salario única para puestos profesionales y de alta capacitación,
más bien promover una estructura flexible adaptada a los ministerios e instituciones reestructurados;
el establecimiento de topes en la utilización de contratos 029 por ministerio para impedir abusos y
promover la descentralización; y
la evaluación del impacto fiscal de la reforma del servicio civil, incluyendo una nueva estructura de
salarios y beneficios, necesidades de capacitación y esquemas unificados de pago de
indemnizaciones.
Se han visto adelantos en el esfuerzo de descentralización del Gobierno, por medio de la
desconcentración defunciones y, particularmente, en el incremento de las transferencias y autonomía
financiera de las municipalidades...
xii.   Conforme fue avanzando el proceso de paz, se vió la descentralización como un medio natural
para ampliar la cobertura, mejorar los objetivos y reducir la concentración del gasto en las áreas urbanas,
especialmente la capital. Aunque el Gobierno no haya establecido claramente una estrategia de
descentralización, sus esfuerzos se han enfocado en la desconcentración de ciertas funciones y el
fortalecimiento de la autonomía financiera de las municipalidades. El esfuerzo de desconcentración se
dió en algunos programas piloto de ciertos ministerios, la transferencia de la ejecución de la inversión
pública a los fondos sociales, la descentralización de los programas de educación (PRONADE) y salud
(IAHS), y la puesta en marcha de programas piloto para el mantenimiento de caminos rurales por ciertas
municipalidades. Ha habido un avance sustancial en la descentralización. Como resultado:


vi
*  el Gobierno cumplió con la transferencia oportuna del 10 por ciento de los ingresos generales a las
municipalidades;
*  las municipalidades se han vuelto importantes inversionistas en los sectores sociales (1 por ciento del
PIB), lo cual alcanzaría un nivel muy similar a la inversión de los fondos sociales en 1999;
*  las municipalidades están comenzando a jugar un papel activo en los consejos de desarrollo regional;
*  el número de municipalidades que actualmente administran sus propios recursos se incrementó de 10
en 1995 a 52 en 1999, triplicando estas sus ingresos recibidos durante los últimos tres años; y
*  los proyectos piloto de desarrollo local, tales como DECOPAZ apoyado por el BID en
Huehuetenango y el Proyecto de Desarrollo Local-PDL-apoyado por el Banco Mundial en San
Marcos, representan nuevos enfoques para mejorar la participación de las comunidades locales,
siguiendo una nueva matriz de colaboración inter-gubernamental.
...pero se requiere de una estrategia de descentralización a más largo plazo.
xiii.  Los gobiernos municipales seguirán siendo protagonistas de los esfuerzos del Gobierno para
ampliar la cobertura y cumplir con las necesidades de las comunidades locales. Sin embargo, existe la
necesidad de establecer claramente una estrategia de descentralización global la cual, además de una
ampliada desconcentración ministerial y descentralización de la provisión de servicios públicos, debería
al menos considerar:
la simplificación de la estructura tributaria municipal, reemplazando alrededor de 150 impuestos
obsoletos sobre el consumo y 80 ingresos no-tributarios por una estructura más simple, sólo
manteniendo un número muy reducido de aquellos impuestos de ingreso tributario significativo;
la aprobación de un nuevo Código Municipal y de un marco legal para los Consejos de Desarrollo
requeridos en los Acuerdos de Paz; los cuales, mientras se aprueba la autonomía municipal, deberían
requerir la adopción de normas financieras compatibles con el SIAF-SAG en cuanto a contabilidad,
presupuesto, administración de efectivo y auditoría;
capacitación intensiva para mejorar la capacidad administrativa y financiera de las municipalidades,
incluyendo como meta la adopción de la normativa del SIAF-SAG en dos terceras partes de las
municipalidades para el 2003;
V  la regulación de las condiciones bajo las cuales las municipalidades podrían acceder a los mercados
de crédito comercial y préstamos externos; y
basado en las lecciones de los proyectos piloto de desarrollo local, la promoción de una nueva matriz
de transferencias inter-gubernamentales, la cual debería especificar una clara división de trabajo, los
mecanismos de cooperación de los donantes, las responsabilidades de las comunidades locales,
municipalidades y Gobierno Central en cuanto a la movilización de recursos locales, los criterios de
sostenibilidad de los proyectos y su eventual absorción por programas basados en la comunidad, los
cuales estarían siendo financiados externamente en sus inicios.
Las reformas al sector público están contribuyendo al fortalecimiento de la transparencia, aunque las
reformas de segunda generación deberían asignarle prioridad a la mejora de la gobernabilidad
xiv.   Una buena gobernabilidad es esencial para mejorar la provisión de servicios públicos y su
efectividad en el desarrollo a largo plazo. Muchas de las reformas mencionadas en este informe están
ayudando a mejorarla, aunque una agenda más desarrollada debería estar en el centro de los futuros
esfuerzos. Mejorar la gobernabilidad representa una tarea compleja y de largo plazo, la cual debe
ajustarse a las circunstancias individuales del país. Las reformas encaminadas y aquellas planificadas
contribuirán significativamente a mejorarla, aunque su agenda de largo plazo también debería considerar:
la implementación del programa integral en marcha de reforma judicial, la desregulación, el incremento
de la transparencia en la concesión de actividades privatizadas, el fortalecimiento de la capacidad y


vii
autonomía de las entidades reguladoras de los sectores afectados por la privatización, la elaboración y
cumplimiento de códigos de conducta para funcionarios públicos, la incidencia de la sociedad civil en la
preparación y monitoreo de los programas de gobernabilidad y anti-corrupción en el marco de un Plan de
Integridad Nacional.
ElAcuerdo Socioeconómico de Paz de Guatemala contiene objetivos fiscales muy específicos...
xv.    El Acuerdo SEA contiene la mayoría de las metas monitoreables de los acuerdos de Paz, las
cuales permiten dar seguimiento al avance gradual hacia el logro de objetivos individuales. El Acuerdo
establece metas fiscales y sociales, y estas conllevan metas intermedias, las cuales previenen a las
Autoridades sobre posibles desviaciones y la necesidad de tomar acciones correctivas y/o de
reprogramarlas. Las objetivos socioeconómicos son ambiciosos en el entorno guatemalteco, pero en la
mayoría de los casos son modestos si se les compara con los promedios latinoamericanos.
...y, aunque han habido claros avances, su desempeño general ha sido ambiguo. Exceptuando a la
meta de ingresos tributarios, han habido adelantos positivos en el plano fiscal...
xvi.   El objetivo de los Acuerdos era un crecimiento del 6 por ciento. La economía estaba encaminada
a alcanzar este objetivo durante la primera mitad de 1998, pero el crecimiento desaceleró debido a
condiciones externas adversas, a Mitch, a una severa contracción crediticia que vino como consecuencia
de políticas fiscales y monetarias expansivas, y a las dificultades en el sistema financiero y cambiario.
Las metas de gasto han sido mayormente cumplidas, pero existe un serio retraso en cuanto a la de
ingresos. El Gobierno no ha podido cumplir con las metas impositivas y aún su reciente reprogramación
hasta el 2002 será dificil de cumplir, a menos que la nueva Administración tome acciones inmediatas.
Los objetivos de gasto en educación, salud, justicia, militar y de seguridad pública, vivienda mínima,
desarrollo rural e infraestructura fueron cumplidos, y la meta de salud preventiva estaba encaminada para
lograrse en 1999.
... y algún avance de las metas sociales, aunque con mucho retraso.
xvii.  Aunque los avances sean evidentes, el desempeño en el logro de las metas sociales ha sido menos
que satisfactorio. Los retrasos son significativos y en la mayoría de los casos requerirán probablemente
ser reprogramados por varios años o sustituidos por otro indicador:
*  el programa de alfabetización CONALFA aumentó la alfabetización de un 64.2 por ciento en 1994 a
un 67.4 por ciento en 1998, muy cerca de la meta de paz del 70 por ciento;
+  como resultado de PRONADE (el programa escolar de participación comunitaria rural), la cobertura
total de 3 años de educación primaria aumentó de aproximadamente 84 por ciento en 1996 a 89 por
ciento en 1998, pero seguramente no alcanzará la meta del 100 por ciento para 1999;
*  la mortalidad infantil se redujo debido al éxito del programa del Sistema de Atención Integrada a la
Salud (IAHS) - de 39.9/000 en 1995 a 37/000 en 1997 y debería alcanzar 32/000 en el 2000; y
aunque sea una mejora significativa, no logrará alcanzar la meta de paz de 20/000;
*  no existe información confiable para estimar las tendencias de mortalidad materna y, por lo tanto, el
cumplimiento de la meta de paz. Los estimados existentes oscilan de menos de 100 a casi 200
muertes por cada 100,000 nacimientos vivos, y el subregistro representa un impedimento para el
monitoreo adecuado de este indicador; y
*  pese a que no se han reportado casos de polio y apenas unos cuanto casos de sarampión han sido
reportados en Guatemala desde 1995, queda pendiente una certificación internacional: la cobertura
de la inmunización de polio y sarampión llegó a 88 y 79 por ciento en 1998; mientras que la
certificación internacional requiere que sea de 85 y 95 por ciento.


viii
Esto requerirá la reprogramación de las metas...
xviii. Debido al progreso ambiguo hacia el logro de las metas socioeconómicas de paz, es inevitable
considerar su reprogramación, eliminación o sustitución. Para lograrlo, será importante restablecer metas
realistas, garantizando la continuidad en los adelantos importantes logrados a la fecha. Las siguientes son
opciones que deberían ser consideradas:
/  La meta de carga tributaria ha sido reprogramada para el 2002, pero aún esto parece ser difícil de
alcanzar a menos que la nueva Administración actúe con rapidez para alcanzar los 3 puntos
porcentuales del PIB requeridos aún para llenar la brecha. En coherencia con el Pacto Fiscal, las
medidas a ser consideradas debiesen incluir: el incremento de la tasa del IVA a niveles
centroamericanos (con un .rendimiento estimado de 1 por ciento del PIB), la eliminación de
exenciones impositivas (0.5 por ciento del PIB), ingresos adicionales acumulados por mejoras
esperadas en la recaudación por la SAT (0.5 por ciento del PIB) y otras modificaciones de tasas
impositivas equivalentes a aproximadamente un 0.5 por ciento del PIB.
/ La reprogramación de un año para completar la meta de alfabetización, según la actual tasa de
promoción, y siempre y cuando CONALFA cumpliese con sus proyecciones de registro de
analfabetos, incrementase su tasa de aprobación estudiantil y asegurase los fondos necesarios.
/ Pareciese ser necesaria una reprogramación de siete años de la meta de tres años para la cobertura de
educación primaria. Alcanzar la meta del 100 por ciento para el año 2006 requerirá un mayor
esfuerzo, incluyendo la absorción de un mínimo de 75,000 nuevos estudiantes anuales en los
programas de PRONADE y de Ciclo Vespertino (manteniendo constantes las tasas de inscripción del
sistema tradicional), una leve mejora en cuanto a las tasas de promoción, repetición y abandono, la
construcción de 1531 escuelas adicionales y un incremento de aproximadamente US$23.4 millones
para el presupuesto anual de educación.
/  También pareciese ser necesaria una reprogramación de siete años de la tasa de mortalidad infantil
debido a su tendencia actual, ya que el esfuerzo requerido para disminuir esta tasa se toma dificil más
a medida que se pretende alcanzar cifras de un dígito. Alcanzar esta meta para el año 2006 implica
que el IAHS: continúe ampliando su cobertura en 100,000 nuevos beneficiarios anuales, que se
cumpla la relación salud preventiva/curativa de la meta de paz, que se extienda el apoyo de las ONGs
y que el presupuesto anual de salud se incremente con aproximadamente US$4.4 millones.
/ La meta de mortalidad materna debería ser eliminada ya que los problemas relacionados con la
información pertinente no permiten su monitoreo en forma constante y confiable.
/ Las metas de erradicación de la polio y del sarampión deberían ser reemplazadas por metas de
cobertura de inmunización. Ya se cumplió con la meta de cobertura de polio del 85 por ciento de los
niños menores de 5 años en 1998 y se considera la de cobertura de sarampión del 95 por ciento de los
niños menores de 1 año es alcanzable, pero en el año 2002.
...considerando también la introducción de una serie de indicadores complementarios de evaluación
del desempeño...
xix.   El monitoreo de la implementación de la paz y su impacto en el bienestar social se verían
beneficiados por la inclusión de una serie pequeña y bien seleccionada de indicadores complementarios,
poniendo especial atención no solamente al acceso, sino también a la calidad, eficiencia y objetividad. En
educación incluirían: las tasas de promoción de CONALFA, las inscripciones de PRONADE, el número
de escuelas bilingües, las tasas de abandono escolar, de repetición y de promoción, y la relación
estudiantes/maestro(a) en educación primaria. En salud incluirían: el número de puestos de salud del
IAHS, el número de proyectos para agua, saneamiento y nutrición, la cobertura de la inmunización y los
casos de enfermedades perinales y transmisibles en la mortalidad infantil.


ix
...y otros compromisos de política.
xx.    Garantizar que habrá mejoras sostenidas en cuanto a bienestar social es claramente más complejo
que sólo cumplir con las metas. Para lograrlo, es crítico mantener los esfuerzos y evitar retroceder ante
los limitados logros. Posibles nuevas prioridades deberían ser:
la ampliación de la cobertura de PRONADE y del IAHS y la mejora de la calidad educativa
(mejorando las tasas de abandono, repetición y promoción escolares), el incremento del número de
escuelas rurales en áreas indígenas más que en áreas urbanas, y el continuo incremento selectivo de la
asignación de materiales de enseñanza y de provisiones médicas;
V  debido a la alta concentración de baja cobertura educativa/analfabetismo y de mortalidad
infantil/materna en una tercera parte de todos los departamentos, la focalización de las inversiones de
PRONADE e IAHS en tales departamentos;
el cambio del enfoque de CONALFA hacia la alfabetización post-adulto, para mejorar su tasa de
promoción actual;
el continuo incremento del gasto de salud para lograr alcanzar una relación 3/2 entre salud
preventiva/curativa, aumentar el número de proyectos rurales de agua, saneamiento y nutrición;
la integración del gasto de los fondos sociales y de las municipales al SIAF-SAG para garantizar su
monitoreo, eficacia y transparencia; y
el fortalecimiento de la calidad de la información socioeconómica basado en el ejercicio integral en
marcha de medición de niveles de vida 2000-2003 (según el programa MECOVI) para evaluar las
tendencias de la pobreza, analizar el impacto de la reforma del gasto y apoyar la coordinación
interministerial y entre los donantes.
En conclusión...
xxi.   Guatemala ha logrado adelantos significativos en la implementación de los compromisos de paz.
Si bien quedan brechas significativas, la reforma del gasto público proporciona una base sólida para
apoyar una segunda generación de cambios; los cuales pueden consolidar los avances y apoyar una bien
justificada reprogramación de las metas de paz más importantes. El serio compromiso adoptado por el
Gobierno entrante con la profundización del Proceso de Paz y la modernización del sector público será
clave para llevar adelante con éxito estos esfuerzos.



EXECUTIVE SUMMARY
The signing of peace in 1996, provided Guatemala with a unique opportunity to redefine its
development agenda, but also posed a major challenge to modernize its public sector.
i.     When the final Peace Accords were signed in December 1996, Guatemala had a unique
opportunity to reverse a long-standing development pattern that had led to widespread poverty and the
exclusion of large segments of its population. The Peace Accords aimed not only to end the armed
conflict but also, and more fundamentally, to redefine the country's economic and social development
agenda. Underlying the Peace Accords is a vision of a more prosperous, inclusive and egalitarian society.
At the same time, the Government realized it faced a formidable challenge in implementing the Peace
Accords and turning this vision into reality. The Government's 1996-2000 Economic and Social Program
articulated a strategy for faster growth and reduced poverty, in line with the Peace Accords. Sustaining
peace and accelerating growth would require a sound macroeconomic framework, the financing of peace
programs within a prudent fiscal stance, redefining the relationship between the private and public sectors
to support private sector-led growth, and a comprehensive restructuring and modernization of
Guatemala's public sector. This report, the third in a series that has accompanied the peace process,
analyzes the macroeconomic framework, progress in restructuring public expenditure patterns,
institutional reforms to modernize the public sector, progress in meeting peace targets and the remaining
reform challenges.
The Government realized at the outset that public sector modernization would be key to the fulfillment
of the Peace Accords and the attainment of its longer-term development goals.
ii.    The Socioeconomic and Agrarian Issues (SEA) Accord provided the underlying rationale for
public sector modernization and expenditure reform. In addition to a sound macroeconomic framework,
reforms were needed to expand the tax base, shift expenditures toward previously-neglected social and
basic infrastructure sectors, reallocate public spending away from Guatemala City to increasingly benefit
rural (mostly indigenous) poor communities, and enhance the equity and efficiency of public service
delivery.
There has been considerable progress in a number of areas...
iii.   Guatemala has made considerable progress in reforming public expenditure patterns and
improving the internal efficiency of the public sector. These efforts have been helped by complementary
measures to reduce domestic public debt and progress in the Government's privatization program.
Progress has been strong in terms of:
*  increasing public spending in line with the social and economic targets agreed in the Accords;
*  improving the capital/current expenditure mix to reverse decades of underinvestment in basic
infrastructure and social services;
*  increasing budgetary flexibility and shifting spending toward priority social and basic infrastructure
sectors; social and basic infrastructure spending now accounts for about 70 percent of the budget,
with priority assigned to: pre-primary and primary education, preventive rather than curative health,
low-income housing and rural infrastructure;
+  delegating execution of social and basic infrastructure investments to the social funds and sub-
contracting schemes with the private sector;
*  beginning the process of shifting resources outside of Guatemala City;
*  successfully implementing disaster management, like the Mitch Emergency Plan; and
*  making efforts to improve targeting on the poor.


ii
...which needs to be sustained, but macroeconomic instability poses a more immediate threat.
iv.    Reforms need to be consolidated and deepened, but a more immediate challenge has emerged due
to the recent downturn in the external economic environment and the weakening of macroeconomic
fundamentals. Increased macroeconomic vulnerability is largely the result of more lax fiscal policy in the
lead up to the national elections, erratic and inappropriate monetary policies, and the continuing failure to
strengthen the tax base. These conditions, in turn, are linked to weaknesses in the financial system and
the country's external position. Privatization appears to have fed fiscal illusion, contributing to a
relaxation of fiscal policies, while the public sector's contingent liabilities are growing due to a
weakening financial system.
A pre-condition for sustained peace is to reduce macroeconomic vulnerability...
v.     The need to correct macroeconomic imbalances, which will face the new Administration in early
2000, risks diverting attention from the remaining challenges in the peace agenda. A top priority over the
short term should be to strengthen macroeconomic management in order to reduce the scope for a dual,
currency and banking crisis. While attempting to protect, as far as possible, priority peace programs
during the adjustment phase, economic policies should aim to:
/  reduce the fiscal and ensuing external current account deficits to sustainable levels-to about 1 and 3
percent of GDP, respectively;
/ maintain a tight and stable monetary policy, avoiding the boom-bust cycles that have characterized
credit markets recently;
V rebuild foreign exchange reserves to cover the monetary base;
V  maintain an effective neutral real exchange rate policy; and
V reduce contingent liabilities by strengthening prudential regulations in the financial system, including
implementing the recently-approved reforms of the banking law, closing or merging insolvent
institutions, and considering the establishment of budget contingent sources of liquidity to rebuild
public confidence in the solvency of the financial system.
...but widening the tax base will also be essential for macroeconomic stability and to finance peace...
vi.    The dual challenge of regaining macroeconomic stability while advancing on the peace agenda
can only be met by strengthening the tax base. A key failure in the peace process has been the significant
lack of progress in meeting the Peace Accord target on the tax revenue ratio. Guatemala's recent
experience suggests that the new Administration should act early and forcefully on the tax revenue front if
it is to meet the rescheduled Peace Accord revenue target in line with the consensus being built by the
National Fiscal Pact. Meeting this objective will require increases in tax rates, a reduction of tax
exemptions, a more effective tax administration by the SAT, reform of the tax code and judicial
procedures dealing with tax evasion cases, and full eradication of tax amnesties.
...as well as further expenditure reforms.
vii.   Progress in expenditure reform has been substantial. This progress needs to be sustained and
deepened, especially aiming to:
V at the macro level, maintain a minimum ratio (r) of capital to current expenditure of 0.55, which in the
short term would require tight control over public sector employment, except in the education sector
where additional teachers are needed to meet peace commitments; and at the micro level, evaluate the
r coefficient of existing and new projects, weeding out unproductive ones;
V target a minimum of 75 percent of budget spending on social and basic infrastructure;
V use future privatization proceeds to, first, fully repay short-term (less than 6-months) and/or dollar-
indexed (less than 1 year) bonds gradually so as to prevent liquidity shocks and, second, consider the


iii
creation of a special fund whose interest would finance long-term development programs with high
economic or social returns (as in Panama);
/  shift the mix of external-to-domestic debt to a 2/1 ratio, while reducing the level and lengthening the
maturity of domestic debt;
/ take advantage of the IFMS and GIS tools to enhance expenditure targeting on the poorest; consider
setting minimum spending targets, subject to monitoring, such as: 60 percent of Central Government
spending allocated outside the capital, and 50 percent of spending by the social funds on the poorest
regions, departments, municipalities and localities; and
/ consider the elimination or merger of low-performing social funds--other than the three big ones FIS,
FONAPAZ, FSDC and, perhaps, FOGUAVI-and improve coordination and specialization among
the remaining funds.
Modernization of financial management through the Integrated Financial Management System
(IFMS) has significantly improved service delivery...
viii.  The aim of public sector modernization has been to enhance its public service delivery capacity,
with a focus on alleviating poverty and improving social conditions. The Government realized early on
that its efforts to modernize the public sector needed to start by improving the way the public sector
manages its own finances. Thus, at the core of the Government's modernization effort is the adoption of
an integrated financial management system, not only to increase the efficiency of financial management
but also to improve accountability. After three years of implementation, the achievements are impressive
and include:
*  creation of an integrated core of basic and expandable financial management functions: budgeting,
accounting, cash management, auditing and procurement;
*  a common budgetary accounting framework across all ministries and public institutions;
*  a centralized accounting system-on cash and accrual basis-with fiber optic-supported virtual
access and Y2K-compatibility;
*  the use of electronic fund transfers for more than 50 percent of public sector payments, including the
wage bill, thus significantly eliminating the use of checks;
*  shorter and more transparent payment procedures leading to reduced steps, time and transaction costs;
*  the creation of a unique database for all financial transactions, with Internet access open to the public;
*  the creation of audit trails and the reduction of practices with high corruption potential (i.e., multiple
accounts, discretionary payments, phantom suppliers, and premium prices for late payments);
*  a transparent new procurement system leading to significant reduction of prices paid for supplies;
*  elimination of arrears (floating debt) to domestic suppliers and shortages of project counterpart funds;
*  full appropriation by ministries of their approved budget on a daily basis;
*  marked increases in annual budget execution by ministries from under 50 percent in the early 1990s
to over 90 percent at present;
*  improvements in quarterly budget planning and cash-management;
* the doubling of external loan disbursements between 1997 and 199.8; and
*  the halving of the time required for loan processing and approval by Congress.
...but the new system must be consolidated and sustained
ix.    The IFMS has made a promising start but a continued effort is required to ensure it becomes
sustainable, especially in terms of consolidating and extending it further, and strengthening its underlying
legal and institutional framework. Over the medium term, efforts need to focus on:
/ expanding horizontally to integrate all ministries, social funds and most municipalities, which remain
outside the budgetary and the Comptroller's auditing process;
/ creating an external and domestic public debt management unit at MIFIN, which should absorb
CIACI and External Financing;


iv
/ integrating SEGEPLAN's GIS to the IFMS software system, so as to have a single and coherent
public investment planning and monitoring tool;
V  developing a Medium-Term Expenditure Framework and adopting the IMF Code on Good Practices
and Fiscal Transparency, including full accounting and budgetary provisions for contingent liabilities;
V supporting the modernization and autonomy of the Comptroller General's Office;
V strengthening the system's legal base, through approval of laws on the IFMS, the Comptroller
General's Office, public procurement and administrative probity; and
/ maintaining a strong and professional national team, while strengthening domestic capacity to run the
system by promoting training in public institutions, professional associations and universities.
Civil service has been the missing link in public sector reform...
x.     Although civil service reform is a key priority in the Peace Accords, and is critical to sustain
economic modernization and expenditure reform in the medium-term, the Government has been unable to
carry out a comprehensive reform in this area. While comprehensive civil service reform is pending, the
Government was able to take discrete measures to restructure public employment in line with peace
priorities. These measures have resulted in:
*  a significant internal restructuring of public employment, with staff reductions in three ministries-
Transport and Communications, Agriculture and Finance-offset by increases in two ministries
mandated by the peace accords, Education and Governance;
*  a reduction in overall public sector employment as a result of the privatization process;
*  a slight decrease in the wage bill as a proportion of current expenditures, which may signal some
improvement in public sector efficiency which, however, is difficult to confirm due to inconsistent
and incomplete data on total public sector employment and the voluntary retirement programs;
*  improved salaries and benefits for staff in the new SAT and National Police, although significant gaps
remain between private and public sector wages, especially for top categories; and
*  increased labor mobility in the professional and upper managerial levels due to the expansion of 029
(temporary) contracts.
... and needs to be approached in a comprehensive way.
xi.    These limited and ad hoc reforms appear to have contributed to improved efficiency and
flexibility in the public sector, but they need to be reinforced as part of a broader and longer-term effort to
reform the civil service. The success of public sector modernization and expenditure reforms is placing
additional demands on the civil service, and they will be difficult to sustain unless they are accompanied
and reinforced by a modern, efficient and merit-based civil service. A civil service reform agenda would
need to consider:
/ early actions to cancel vacancies automatically, once severance benefits for retired workers still on
the payroll are completed;
/ amending the civil service law to create a new civil service career path, reforming the public sector
salary system, redefining the role of unions, and streamlining procedures to handle labor disputes,
limiting appeals to the labor courts;
V transforming the Junta Nacional del Servicio Civil into an independent Civil Service Commission,
and setting new procedures for recruiting, hiring, promotions and training;
/ limiting ONSEC's function to a normative role;
/ not defining a single salary structure for professional and high-skilled categories, but rather one
tailored to restructured ministries and institutions;
/ setting ceilings on 029 contracts by ministry, to prevent abuses and promote decentralization; and
/ assessing the fiscal impact of comprehensive civil service reform, including the new salary and
benefits structure, training needs and unified severance payments schemes.


V
The Government has made progress in its decentralization effort, through some deconcentration of
functions and especially in increasing the transfers and financial autonomy of municipalities...
xii.   As the peace process advanced, decentralization was seen as a natural way to expand coverage,
improve targeting and reduce the expenditure bias toward large urban areas, especially the capital.
Although the Government has not articulated a longer-term decentralization strategy, its decentralization
efforts have focussed on deconcentrating selected public sector functions and strengthening the financial
autonomy of municipalities. The Government has made only limited progress in deconcentration but
substantial progress in transferring resources to the municipal level. The deconcentration effort has
focussed on pilots in a few ministries, transfer of investment execution to the social funds, decentralized
programs in education (PRONADE) and health (IAHS), and pilot programs to transfer responsibility for
rural road maintenance to selected municipalities. There has been substantially more progress with
general decentralization to municipalities. As a result:
*  the Government has complied with the timely transfer of 10 percent of general revenues to the
municipalities;
+  municipalities have become major investors in the social sectors (1 percent of GDP), which is
projected to be very close to investment by the social funds in 1999;
*  municipalities are beginning to play an active role in the regional development councils;
*  the number of municipalities now administering their own financial resources increased from 10 in
1995 to 52 in 1999, tripling the revenues they received in the past three years; and
#  pilot local development projects, such as the IDB-supported DECOPAZ in Huehuetenango and the
Bank-supported Local Development in San Marcos, are testing new approaches to enhance
participation by local communities under a new matrix of inter-government collaborative efforts.
... but a longer-term decentralization strategy is needed
xiii.  Municipal governments will continue to play a leading role in Government efforts to expand
coverage and meet the needs of local communities. There is a need, however, to articulate a
comprehensive decentralization strategy which, in addition to further ministerial deconcentration and
decentralization of specific service delivery schemes, should consider:
/ rationalizing the municipal tax structure by replacing the 150 outdated excises and 80 non-tax
revenues, by a simpler structure retaining a handful of the most revenue-significant taxes;
/ approving a new Municipal Code and legal framework for Development Councils required by the
Peace Accords, which while providing for municipal autonomy, should require IFMS financial
standards in terms of accounting, budget, cash management and auditing;
/ intensive training to improve the administrative and financial capacity of municipalities, including the
application of IFMS standards in two-thirds of municipalities by 2003;
/ regulating the conditions under which municipalities can access commercial credit markets and
external borrowing; and
/ based on the lessons of pilot local development projects, promoting a new matrix of inter-government
transfers, which should specify a clear division of labor, donor coordination mechanisms, the
responsibilities of local communities, municipalities and the Central Government in terms of
mobilizing local resources, the sustainability of projects and the eventual absorption of community-
based programs which are currently externally funded.
Public sector reforms are contributing to strengthen transparency and governance, but a set of second
generation reforms should assign high priority to improved governance.
xiv.   Good governance is essential to improve public service delivery and longer-term development
effectiveness. Many of the reforms discussed in this report are helping to improve governance and
transparency across Guatemala's public sector, but a full-fledged governance agenda should be at the core


Vi
of future reform efforts. Improving governance is a complex and long-term undertaking, which must be
tailored to individual country circumstances. Reforms underway or planned will make important
contributions to improved governance, but a longer-term agenda should also consider: implementing the
comprehensive judicial reform program, deregulation, increased transparency in the regulation of
privatized activities and the privatization process, strengthening the capacity and autonomy of regulatory
and control agencies, development and enforcement of codes of conduct for public officials, the
involvement of civil society in the preparation and monitoring of governance and anti-corruption plans,
and the development of a national integrity plan.
Guatemala's Peace Accords contain very specific fiscal (input) and outcome targets...
xv.    Most targets are contained in the SEA Accord and aim to keep track of gradual progress toward
individual goals. They are divided into fiscal and social targets, and involve intermediate targets, which
alert the Authorities to possible deviations, the need to take corrective actions or reschedule targets. The
targets are ambitious by Guatemalan standards, but in most cases they are modest by Regional standards.
...and while there are clear improvements, overall performance has been mixed With the exception of
the tax ratio, there has been good progress on the fiscal side...
xvi.   The Accords targeted economic growth of 6 percent. The economy was on track to meet this
target during the first half of 1998, but growth has slowed due to adverse external conditions, Mitch, a
severe credit crunch following lax monetary and fiscal policies, and difficulties in the domestic financial
and exchange system. The fiscal spending targets have been largely met but there is a serious lag on the
revenue side. The Government has been unable to comply with the tax target, and even its recent
rescheduling to 2002 will be difficult to meet unless the new Administration moves quickly on the tax
front. Spending targets in education, health, justice, military and public security, low-income housing,
rural development and infrastructure were met, and the target on preventive care is on track for 1999.
Targets in four areas were exceeded-military, public security, rural development and infrastructure.
...and some progress on social outcomes, but with considerable delays.
xvii.  Although progress is clearly evident, performance in meeting social outcomes has been less than
satisfactory. Deviation are significant and most are likely to require rescheduling, reprogramming or
substitution by another indicator:
*  the CONALFA literacy program has increased literacy from 64.2 percent in 1994 to 67.4 percent in
1998, close to the 70 percent peace target;
*  as a result of PRONADE (the community participation school program), gross coverage of 3 years of
primary education increased from about 84 percent in 1996 to 89 percent in 1998, but is likely to fall
short of the 100 percent target by 1999;
*  infant mortality is decreasing due to the success of the Integrated Attention to the Health System
(IAHS) program-from 39.9/000 in 1995 to 37/000 in 1997 and should reach 32/000 in 2000;
although a marked improvement, it will be short of the peace target (20/000);
*  there are no reliable data to estimate trends in maternal mortality and hence fulfillment of the peace
target-existing estimates range from under 100 to almost 200 deaths per 100,000 living births;
under-reporting is a major constraint on monitoring this indicator; and
*  no polio and only a few isolated measles cases have been reported in Guatemala since 1995, but
international certification is pending; immunization coverage for polio and measles was 88 percent
and 79 percent in 1998-international certification requires 85 and 95 percent.


Vii
This will require rescheduling or reprogramming key peace targets,...
xviii. Given the mixed performance in reaching peace targets, it becomes unavoidable to consider their
rescheduling, elimination or substitution. In doing so, it will be important to set realistic and attainable
goals to ensure that the important progress achieved to date is maintained. The following are possibilities
and options that would need to be considered:
V the tax ratio target has been rescheduled for 2002 but even this appears difficult to attain unless the
new Administration acts quickly to mobilize most of the approximately 3 percentage points of GDP
required; measures to be considered would need to include: increasing the VAT rate toward Central
American levels (13 percent), eliminating tax exemptions, additional revenues from SAT
implementation, and other tax policy measures equivalent to about 0.5 percent of GDP.
/a one-year rescheduling of the literacy target is needed under the present promotion rate, provided
CONALFA meets its projections for registration of illiterates, increases its student approval rate, and
secures the necessary funding;
/a seven-year rescheduling of the target of three years of primary education coverage appears
necessary; meeting the target of 100 percent coverage by 2006 will still require a major effort,
including absorption of a minimum of 75,000 new students per year under the PRONADE and
Afternoon-cycle programs (with enrollment rates in the traditional system remaining constant), some
improvement in promotion, repetition and dropout rates, construction of 1,531 additional schools, and
an education annual budget increase by a minimum of about US$23.4 million;
/  a seven-year rescheduling of the infant mortality rate also appears necessary given its present trend,
since the effort required to decrease this rate becomes more difficult as it approaches single figures;
meeting this target by 2006 implies that IAHS: continues expanding its coverage with 100,000 new
beneficiaries per year, the peace target ratio for preventive/curative health is met, NGO support is
expanded, and a health annual budget increase by a minimum of about US$4.4 million;
v  the maternal mortality rate should be eliminated since data problems prevent reliable monitoring; and
V poliomyelitis and measles eradication should be replaced by immunization coverage; the polio
certification target of 85 percent coverage of children under 5 was met in 1998, whereas reaching the
measles certification target of 95 percent of children under I would likely be reached in 2002.
...considering a complementary set of performance indicators...
xix.   Monitoring peace implementation and its impact on welfare would benefit from a wider set of
complementary indicators, paying particular attention not just to access, but also to quality, efficiency and
targeting. These could include: in education, CONALFA promotion rates, PRONADE enrollments,
number of bilingual schools, dropout, repetition and promotion rates, and student/teacher ratios in primary
education; and in health, IAHS health posts, number of water and sanitation projects, nutrition
interventions, immunization coverage and cases of perinatal/transmittable sicknesses in infant mortality.
...and other policy commitments.
xx.    Meeting social outcome targets and ensuring that there are sustained improvements in welfare is
clearly much more complex than meeting input targets (e.g., raising tax revenues, increasing health
spending, etc.). Maintaining momentum and avoiding backtracking, even in the face of under-
achievement, becomes critical, especially given that results have been mixed. Priorities should aim to:
V  expand PRONADE and IAHS coverage, and improve education quality (reducing dropout and
repetition rates), increasing the number of rural schools in indigenous areas faster than in urban areas,
and increase allocations for teaching materials and medical supplies;
V  given the high concentration of low education coverage/illiteracy and infant/maternal mortality in a
third of all departments, target PRONADE and IAHS investments accordingly;
/ change CONALFA's approach to post-adult literacy, to increase its present promotion rate;


Viii
$ continue to raise health outlays toward 3/2 preventive/curative health ratio, rural water and sanitation
projects and nutrition programs;
V integrate spending by social funds and municipalities in the IFMS to ensure monitoring and
accountability; and
V strengthen data quality based on the upcoming LSMS 2000-2003 (under the MECOVI program), so
as to track poverty trends, analyze the impact of expenditure reform and support donor coordination.
In conclusion...
xxi.   Guatemala has made important progress in implementing peace commitments. Although some
important shortcomings remain, public sector and expenditure reforms provide a solid foundation on
which to base a second generation of reforms which can consolidate progress and support a
reprogramming of major peace targets. Key to these efforts will be a strong commitment by the incoming
Government to the peace process and the deepening of the public sector modernization and expenditure
reform program.


INTRODUCTION
This report is the third in a series of joint Government-World Bank reviews designed to
accompany and support Guatemala's peace process (Guatemala: Building Peace with Rapid and
Equitable Growth, 1996, No. 15352-GU; and Guatemala: Investing for Peace. A Public Investment
Review, 1997, No. 16392-GU). As this report was under preparation in late 1998, Guatemala faced an
emergency caused by Hurricane Mitch and increasing macroeconomic pressures associated with
expansionary monetary and fiscal policies. Macroeconomic conditions continued to weaken in 1999,
exacerbated by a number of external shocks, inappropriate macro policies and a fragile financial system.
The success of the privatization program, in turn fed fiscal illusion, which was especially hard to resist in
an electoral year. The availability of relatively large privatization proceeds created a sense that the
emerging macroeconomic imbalances could be tolerated, peace and electoral outlays could be financed
without the need to adopt revenue measures, and that international reserves were adequate to defend the
Quetzal and keep inflationary pressures under control.
By end-March, as the election campaign intensified, policy-makers debated the right policy
response-stabilization vs. expansion. In the end, fears that rising interest rates (from tighter monetary
policy) would feed a recession and weaken an already battered banking system, prevailed. On April
1999, the Government submitted to Congress a proposal for an extraordinary budget increase of Q3
billion financed with privatization proceeds. The proposed expansion would be equivalent to 2.2 percent
of GDP and absorb almost three quarters of privatization proceeds. If fully implemented, it would lead to
fiscal and external current account deficits close to 5 and 6.5 percent of GDP, respectively. Despite
strong concerns from many quarters, Congress approved the Q3 billion budget increase. Although the
Government looked for ways of reducing the impact of the planned fiscal expansion, the markets reacted
negatively to the proposed fiscal package and the uncertainty over the Government's macro stance,
contributing to two severe speculative attacks on the Quetzal in May/June and August/September. By
end-June, international reserves earned from privatization proceeds were fully exhausted in defending the
currency. By end-September the Government succeeded in canceling the proposed fiscal expansion and
proceeded to tighten somewhat monetary policy. Although a major fiscal crisis seems to have been
averted, the incoming Administration will need to act quickly to strengthen macroeconomic policies and
reduce the uncertainty in markets caused by the erratic and inconsistent policies of the past two years.
While the original intention of this report was to analyze the fiscal stance supporting the peace
process, progress in the Government's state modernization program, and performance in meeting agreed
socioeconomic peace targets, the macroeconomic developments described above and the possibility of a
major crisis required a more detailed analysis and intensified policy dialogue on the underlying
macroeconomic risks in Guatemala. While this necessarily entailed delaying production of the report
itself, the process of analyzing the macro situation with Government counterparts contributed in some
measure to the avoidance of a more serious macro crisis. The report retains the macro analysis that was
used in the policy dialogue with the Government, since although a major crisis seems to have been
averted, the analysis remains broadly valid and should help to inform the incoming Administration's
macroeconomic agenda.
The analysis, policy dialogue and the process followed to prepare this report also proved useful in
a number of specific areas. First, the macro analysis and fiscal projections were presented as a World
Bank input to the Fiscal Pact-a national forum created by the Peace Commission to build consensus
around a commonly agreed and, to the extent possible, apolitical fiscal agenda for 2000-03, especially on
the tax front. The Fiscal Pact Meeting took place on October 12-13, 1999 in San Salvador, which
included representatives from the Government, main political parties and civil society. Second, the macro
analysis and recommendations were also used in an emergency donor meeting in Washington on October


1, 1999, called by MINUGUA to review macroeconomic developments. Third, the report's Chapter II
recommendations on public sector modernization were an input in the elaboration of the 2000 budget.
Fourth, Chapter III has served to inform discussions between MINUGUA and the Government on
reprogramming of the peace targets. This will need to be taken up with the incoming Government, but
the analysis in the report and the supporting working papers is helping to provide a technical base for the
discussions. Fifth, the special sector reports have been considered by the leading think tanks, which are
preparing policy proposals to be submitted to the new Government. The Bank will support further
dissemination efforts as deemed appropriate by the new Administration in early 2000.
Preparations for the study were fully supported by the Economic and Social Cabinets, in
particular by the Ministries of Finance, Education, Health, Communications and Transport, Energy, Bank
of Guatemala, SEGEPLAN, FIS, FONAPAZ, FSDC, INFOM and the Superintendencies of Energy,
Telecommunications and Tax Administration, who also provided continued valuable inputs to the special
sector reports. Most agreements and conclusions discussed with the Authorities, think tanks, sector
specialists, political parties and civil society are reflected in these reports.


CHAPTER I
POST-CONFLICT EXPENDITURE TRENDS AND CHALLENGES
A.      Overview
1.1     The Peace Accords signed in December           Box 1.1 Selected Peace Accord Targets
1996 provide the overall framework for public
sector modernization and expenditure reform in             iaa
Growth: 6 percent by the -,ear 2000.
Guatemala. For many decades, public investment ..    T            50 percent increase in the tax
in the social sectors and basic infrastructure was    revenue ratio between 1995 and 1999.
seriously neglected.   The Socioeconomic and      *  Public Spending:(i 50 percent increase of
Agrarian Issues (SEA) Accord, in particular,         executed public expenditure in health and
aims   to   restructure  expenditures-reducing       education in 2000 with respect to 1995, (11) at
least 50 percent of excecuted health expenditures
military spending and increasing spending on         devoted to preventive care before 2000; (iii) 1.5
social and basic infrastructure-and enhance the       percent of tax revenues ailoaed to low-income
equity and efficiency of public service delivery      housing from 1997: (iv) annual public investment
(Box 1.1). The new Administration inaugurated          ogram on rural development or Q 200 million
and rural basic infrastructure of Q 300 million
in January 1996, realized at the outset that simply    twen 1998-200
redirecting budgetary allocations to priority areas *. Coverage qf Education i) facilitate the access to
would    not  be   sufficient  to  meet   peace       3 years of primary education to 7-12 yea old
commitments, as well as its broader goals of          children before 2000. and 60 increase literac%
faster growth and poverty reduction. Without a        r.t
4-Healah Mi 50 percent reduction in the 1995
concerted effort to reform institutions, processes   infant and maternal moruaiN rates before 2000:
and systems within the public sector, it would be     and (it) maintain poliomyelitis eradicated and
unable to ensure that budget reallocations could      elimination of measles by 2000.
be sustained, reach intended beneficiaries or .
..Judicial Reform  50 percent increase in the
contribute to improvements in quality. The 1997       executed budget allocated to the Judicial Body
World Bank Public Investment Review       (PIR)       and the Public Ministry between 1995 and 2000
(Report No.16392-GU) found       that budgeted   le   Public Securit. 50 percent increase in executed
expenditure reallocations were generally in line      public secury spending bem-een 1995 and 2000
with peace priorities, consistent with a prudent 4e   ArmY (0 33 percent reduction in budget military
spending between 1995 and 1999. (ii 133 percent
fiscal scenario provided progress was made in        reduction of amy personnel in 1997: and iii)
raising the tax base, and included an appropriate    full disbanding of the military police in 1997
change in the public/private mix in service
delivery. It noted, however, the need to advance on the public modernization program, especially
since some sector allocations looked high relative to historical absorptive capacity in key sectors.
1.2     This report adopts a positive rather than a normative approach, which takes the Peace
Accords as a given. It is also based on the premise that the key role that public sector
modernization and expenditure reform would need to play in implementing the Peace Accords
was well understood at the outset in Guatemala. Within this framework, the report looks at three
interrelated aspects of the peace process in Guatemala-the fiscal stance underlying peace
(Chapter d), progress in the public sector modernization program (Chapter cr), and performance in
meeting socio-economic peace targets (Chapter III). The first chapter examines post-conflict
fiscal patterns resulting from peace program implementation, particularly: (i) fiscal trends in the
pre- and post-peace periods; (ii) the consistency between sector policies and public outlays,
including those not directly addressed in the Peace Accords, but which are essential components
of reform; (iii) public spending targeted on the poor; (iv) budget flexibility; and (v) key
challenges remaining, including the need to reduce macroeconomic vulnerability in the short term


3
and ensure sustainability of the reforms in the medium-term. The second chapter evaluates
efficiency improvements in service delivery capacity associated with progress in public sector
modernization and explores a set of pending second-generation reforms. Finally, the third
chapter presents a detailed analysis of the Government's fulfillment of the quantitative and social
benchmarks set in the SEA Accord, especially the role of restructured budgetary allocations and
improved institutional capacity in meeting the agreed targets
B.     Trends in Public Finance during the Pre-Peace Period
1.3    Guatemala suffered a balance of payment crisis in 1990 mainly caused by the
deterioration of public finances. Increased spending and a falling tax ratio-6.9 percent of
GDP-raised the combined public sector deficit (including Bank of Guatemala-BOG-losses) to a
high 4.2 percent of GDP. Inflation reached a record-high 60 percent, foreign exchange reserves
fell to 1.8 months of imports, and the country accumulated external arrears.
1.4    Adjustment measures during 1991-95 stabilized the economy and allowed a modest
recovery in growth, but with little progress on the social front. Economic growth averaged about
4 percent and inflation fell to single digits in 1995. As efforts to raise the tax ratio were only
partially successful-it fluctuated between 6.8 and 8.3 percent of GDP-fiscal discipline was
mainly achieved through tight expenditure control, with combined public spending decreasing
from 17.5 percent of GDP in 1990 to 14.2 percent in 1996, and public investment stagnating
below 3.3 percent of GDP. With limited access to external financing and low tax revenues, the
Government's stabilization efforts also relied on domestic borrowing and monetary policy.
Increased recourse to domestic borrowing raised domestic interest rates above regional levels. To
sterilize the resulting capital inflows, the Government tightened monetary policy through high
reserve requirements and recourse to open market operations to control liquidity, thus also
contributing to higher interest rates and increasing domestic debt service. At the outset of peace,
Guatemala had a relatively stable economy, growing modestly, but with social indicators ranked
among the worst in the Latin American and Caribbean Region (LAC).
1.5    The Peace Accords sought to
alter this historical macro- Figure I.1 - Capital Expenditure of Central Government
development framework through: (i)
faster and more equitable growth to----------                            ,0
make significant inroads in poverty;  4 -                               2500
(ii) ambitious public expenditure                                       2
reforms,   including   additional  a                                    -2,00
spending of over 4 percent of GDP;              i,                     1,000
(iii) a modest tax effort aimed at   I                 t     15
raising the tax ratio to 12 percent of01              1                  0
GDP by 1999, to finance increased     1990 1991 1992 1993 1994 99 1996 1997 1998 1999
social spending  without creating    S        S   A
fiscal instability; (iv)  a  peace
dividend which would shift military
expenditures (0.5 percent of GDP) toward the social sectors; and (v) reliance on external donor
financing to cover temporary deficits arising from the implementation of peace programs. The
Government also launched a privatization program that generated extraordinary capital revenues
of US$584 million in 1998.


4
C. Post-Conflict Spending                          Table 1.1 - Changes in Capital and Current Expenditure Shares,
Trends                                                          "re n Pt    latM24!
1.6   Capital     and     Current Bolivia               1987-92    98     902     22 5   77.5     +
Expenditures. Although there is      Brazl                1984     8.2     91.8    51    94.9     -
optimal     capital/recurrent Chad                  1989     65 1   34 9    58.3    41 7
Chile               1986-88   8.4    91 6    12 1    879     -
spending    mix   for  developing    Colombia             1985     21 8    78.2   18.2    81.8     -
countries   (Pradhan,   1996   and   Costa Rica          1985-89   14 6    85 4   10.8    892      -
Devaraj an,      Heng-fu       and   Guatemala Pre-peace*  1993-95  20     80      25     75      +
J    Guatemala Post-peace*  1997-98  25    75      35     65      +
Swaroop, 1996), implementation       Indonesia           1987-91   44.8   55 2    50.1    49 9    +
of the    Peace   Accords    would   Panama              1984-87   14 5    85 5    2 1    979      -
require   a  marked    reversal in   Rwanda               1991     32 8    672    25.9    741      -
Guatemala's         long-standing    Senegal              1981     8.2     91 8   20.9    79 I1
Togo                1983-85   28.1   71 9    33 7    66.3
pattern    of     severe    under-   Tunisia             1987-89   289     71 1   21.     788      -
investment and low access by the     Turkey               1988     18 2    81 8   14.9    851      -
majority   of the   population   to  Urgnay              1984-89   7.3    92 7     6AI    938      -
Zambia              1984-86   12 1    879    30.4    696     1
public services. Since the early     Zimbabwe             1983     6.3     93.7    7 3    927      +
1990s, the     World   Bank    has   * Note Data for Pre-Peace peiod are 1990-92 before adjustments and 1995-96 after adjustment
consistently        recommended       Date for Post-Peace penod are 1995-96 before adjustment and 1997-98 after adjustment
sustained   increases   in   public  Source Siatistical Appendix, Table 6, 10, Hutler, Roberto, Shah (1997)
capital spending to improve access to basic services by Guatemala's poor and excluded
populations. Little progress was achieved until the Peace Accords were signed, when the
Government began a gradual process of restructuring the level and composition of public
expenditures in order to meet peace targets. In 1998, combined public spending increased to 15.7
percent of GDP-1.5 percent above pre-peace levels-entirely due to an extraordinary increase in
capital expenditures (Figure 1.1). Therefore, compared not only to other countries in pre- and
post-adjustment periods, but to its own 1993-95 pre-peace adjustment period, Guatemala is one of
those countries whose adjustment and/or post-conflict allowed them to raise their capital/current
expenditure ratio: above 50 percent over pre-peace levels (Table 1.1).
1.7     Sector Composition. The Government has made considerable progress in shifting
public expenditures toward key social sectors and basic infrastructure, and in reducing military
and public debt outlays.      In line with the
Government's program and supported by the
World Bank's PIR      recommendations, intra-               Figure 1.2- Allocation of Budget Among Major Categories
sector priorities in education, health, roads,
power      and    telecommunications        were       100                   7
appropriately addressed (Annex G). During
1995-99, spending on (Figure 1.2): h      o
L3  Social sectors reached almost half of the
1999 budget;                                       50
l   Basic infrastructure raised its share to a                            E    & S- W.'r-ru.
m30
quarter, from   a pre-peace share of one-           20
fifth of total expenditure, due essentially         10
to spending on roads and transport;                 0
1991  1992  1993  1994  1995  1996  1997  1998  1999
u   Debt servicing was halved, due largely to           S1 Siau.a AppraiSe, Tat 5
a  significant   reduction   in  BOG     and
domestic debt, while public administration and military expenditures declined by 3 and 4
percent respectively. This may not be sustainable, however, as fiscal policy weakened in
1999 and additional spending may be increasingly financed through domestic borrowing.


5
Figure L3 - Share of Social Funds in      1.8     The growing importance of
Public Investment                 the social funds and municipalities
SIFs / Total                                               explains the large increase in post-
conflict social spending. In 1999,
Hthey account for 30 and 25 percent
-                    9"           of total budgeted public investment.
Health                                                   Data   on   executed   spending    by
municipalities is not available, but
the key role played    by the social
Mii*                                   funds is illustrated in Figure 1.3:
Rthe sa Trofanf                                                                 a
ex  All peace-related    low-income
T'6I W  2P, I(  4C,,   ,. 0%8M.9(r. 10% housing   investments were carried
out by FOGUA VI;
Li  Most school rehabiitation---roughly 80 percent of total education investment-was done by
two funds, FIS and FSDC, sub-contracted by the Ministry of Education;
Lm Social funds accounted for almost half of health investments; and
i   Social fund participation in the road sector investments was only 15 percent, but it almost
doubled from its 1995 pre-peace share.
1.9     Regional Composition.       As post-conflict social spending has increased significantly,
targeting becomes critical for measuring its impact on the poor. The Peace Accords call for a de-
concentration of public spending from Guatemala City, while expenditure reform aims to focus
outlays in the poorest areas of the country. A look at the regional decomposition of expenditures
ranked by the index of unsatisfied basic needs (UBN)i between pre-and post-peace years (1995-
98) reveals important progress but also some shortcomings (Table 1.2):
Table 1.2 - Unsatisfied Basic Needs (UBN), Human Development (HD) and Regional Distribution of Public Expenditure
Central Government*   FIS      FSDC   unicipalitic INOM
Region     T   I BN       HD       1995     1998      1998      1998     1998**    1998
(index)  (index)     (%)       (%)      (%)       (%)       (%)      (%)
VIll          34T 46T   046       4798     4 90      8         4.8      3 6T    T8
H1         -57 0-40              5 08      v471  1--48        7.52     7.40    -   35
IV           21 9      0         574       587      11.91     9.94      9 86     8.15
VII           20T78      38-     7 03      7.11     14.51     10.91     15.63     T88
20           0 50      6.74     8.37      971      1 9       1 45     15.75
VI           16.39    043       9.66     13.60     31 61    2409      27 35     42T35
V            15 50     048       6. 4     707       7.02    1 37      12 56      6
I            10 14     0 8                                   17.43    12T1       90
Source: World Bank Staff estimates based on Rojas (1999), PNUD(1999), Chocano (1999) and tables 33-39 * Percentages add up
100 (prorated debt service and multiregional spending)
** Constitutional 10% of budget current revenues transfer only.
Notes: Region 1: Guatemala; H: Alta Verapaz, Baja Verapaz; m: Zacapa, Chiquimula, El Progreso, Izabal; IV: Jutiapa, Jalapa,
Santa Rosa; V: Sacatepequez, Chimaltenango, FAcuintla; VI: Quetzaltenango, Retalbuleu, San Marcos, Solola, Suchitepequez,
Totonicapan; VILI Quiche, Huehuetenango; VIII: F1 Peten. FIS 98: Up to July 30.
1 The Table also shows the UNDP index of human development (HD), but its simple correlation coefficient with the
UBN index is surprisingly low, 0.38. Other human development indexes (for women and social exclusion) were also
tested, but their correlation with the IJBN coefficient also did not improve.


6
D  There was progress in de-concentrating GOG expenditures from Guatemala City to the
Regions, from 54 to 48 percent;
o  FIS, INFOM, the municipalities and FSDC contributed to this trend, devoting 4, 9, 12 and 17
percent of their resources respectively to Guatemala City, compared to 48 percent by the
Central Government.
L  The Regions that have benefited the most from such de-concentration were not, however, the
poorest (VIII, II and IV), but the richest (VI and to a much lesser extent, V).
o  Peace has not modified the status quo regarding overall budget composition by Regions: (i)
the three poorest regions continue receiving the same share of GOG spending, 16 percent,
whereas the three richest Regions continue receiving roughly 70 percent.
o  In absolute terms, the bulk of social fund investment was not assigned to the Regions with
extreme or severe poverty-lower shares went to the three poorest Regions, 32 percent in the
case of the FIS and 22 percent in the case of FSDC. At the same time, 41 and 54 percent
were allocated to the three richest regions.
1.10   Departmental and Municipal Composition. Although spending on the poorest regions
remains insufficient, targeting by the FIS on the poorest departments was higher and better
focused than FSDC, municipalities, INFOM and the GOG (Table 1.3). In 1998:
u  FIS assigned 35 percent of its resources to the seven poorest departments compared to 21
percent to the seven richest. FSDC, however, assigned 27 percent to the poorest departments
compared to 37 percent to the seven richest.
L  FIS does apply a poverty map (based on UBNs) to allocate resources at the departmental
level. Regression estimates show that the simple correlation coefficient between poverty and
FIS investments by department in 1997 was a positive 61.6 (69 for education and 23 for
water), but a negative -19.7 for sanitation. At the municipal level, however, results are
mixed. The correlation coefficients between FIS investment and poverty for the 289
municipalities with available data,
follow a similar pattern but with lower       TabeL3-UBN,HDandDepartamental Distribution
and   less   significant  regression                of PubicEpenditure - 1"S
coefficients.    The   50    poorest               UBN nD (d      F%DC
municipalities,  however,  show  an     UT.-tn--T        ---      8.48     4.85
inverse relationship (Chocano, 1999b).  AtaVa    31.01  -0.36   3,76     3.88
L  FSDC does not apply poverty criteria to  hula       24.77  0.44    4,20    4.49
allocate  resources.  The    simple     I          2.      0.50            2.04
correlation coefficient between poverty            1277-   0.3    2.47     2.73
and FSDC investments by departments     BqaV       7r     0.49   8.72     3.64
during 1995-98 was a negative -0.38,     u         1.      T       70      543
Same Rosa  18.62   0.48    5 18    3.62
and was only positive in the case of    Suchitepequez  18.37  0.44  2.49  3.74
power projects (Chocano, 1999a).         [Ra1      18T29   0.39   6.26     298
raa    --T 36    0.54   1.44     3.79
o  In the   same vein, investment by       rFl;t-.p   1     -.--     3.47    559
municipalities was not focused   on     SanM mos   16.6    -       6.69    6.13
poverty needs. The simple correlation   AeUTw      TrT-            3.7     3.07
Elry o   3T -61  ----.  2.8     2.58 -
coefficient  between  poverty   and     S          15.42   0.05   1.17     3.03
municipality investments in 1997 was a           ---498   046     3.27   4.67
negative -17.26.  A  similar inverse    T        -                 .1      3.5
relationship was found for municipality  Guaeral   101      6      4.29   17.43
investments  in   the   50   poorest        B        (1999),        PNI (1999)
municipalities (Chocano, 1999b).i


7
1.11   The Mitch Factor. The reconstruction work required as a result of Hurricane Mitch
strengthened the positive aspects of expenditure reform, but also highlighted its shortcomings.
Mitch did not have longer-term effects on domestic production and basic infrastructure, with the
exception of the banana sector and, to a lesser extent, coffee. Preliminary reconstruction needs of
about US$260 million were much lower than those of neighboring countries (Box 1.2). In
response, the Government prepared an emergency plan (the 100 Days Plan), setting specific
sectoral targets for immediate emergency and rehabilitation support. The Plan was managed by
an interim Reconstruction Cabinet and supported by an Emergency Decree that allowed
bypassing Guatemala's standard procurement procedures.   Donors agreed to streamlined
procedures, so as to provide swift external financing under exceptional circumstances.
Box 1.2. Mitch External Financing Reconstruction Needs
(US$ Millions)
4  Agricultural Exports           100-120
4  Roads / Transport               30-40
4  Power                            8-10
4  Telecoms                          6-8
4  Housing                          9-11
4  Education                       10-12
4  Health                          15-20
4  Industry*                       30-40
TOTAL                             208-261
Source: staff estimates based on Government financing requests.
* Projected fall in manufactured exports to the region.
1.12   The Plan was successfully implemented, suggesting a substantial improvement in the
public sector's project execution capacity (para. 2.9). By the end of the 100 days, the
Government had spent Q720.4 million (US$103 million), or about 98 percent of budgeted
resources, having completed almost all planned activities. At least 40 percent of the Plan was
estimated to have been externally financed (Schneider, 1999).
1.13   Post-Mitch reconstruction, however, highlighted a number of important shortcomings:
u  Limited institutional capacity: since Mitch-affected areas were different from those affected
by the conflict-ZONAPAZ-and human resources were scarce, implementation of peace
programs was defacto suspended during the Plan period.
z  Fiscal constraints: a weak revenue base and looser spending, partly related to Mitch, led to a
GOG deficit of 2.4 percent of GDP-1 percent above projections (Table 1.5).
o  An ad-hoc division of labor among Government institutions that threatens to become a
permanent distortion: (i) FONAPAZ was driven to work on non-peace urban areas,
especially low-income housing, where it had little prior experience or technical expertise; (ii)
FSDC got involved in school rehabilitation, a declining priority for its portfolio and a sector
where FIS has a comparative advantage; and (iii) FIS got into areas more appropriately
handled by ministries, such as food distribution and secondary roads rehabilitation.
"  Extreme poverty needs had little relationship with the allocation of Mitch resources. The
simple correlation coefficient between poverty and Mitch investments at the municipal level
is negative, -0.07. A similar conclusion results from the mapping of Mitch investments by
poverty categories in health, water, education, and roads (Schneider, 1999).
1.14   Expenditure Flexibility. Increased budgetary flexibility has been a major achievement
of the reforms (Table 1.4). In 1990, Guatemala ranked among countries with the most inflexible
budget (inflexibility index of 80 percent). Under the structural adjustment program it diminished
to 52 percent in 1995 and post-conflict reforms lowered it further to 40 percent in 1998. Key
factors explaining such outcome were lower public debt interest payments, higher tax revenues


8
and lower military expenditures. Implementation of the Integrated Financial Management
System (IFMS) also contributed (para. 2.6). Budget flexibility helped finance the initial steps
toward fiscal decentralization, including the more than doubling of earmarked transfers to
municipalities from 0.4 percent of GDP in 1990 to 1 percent in 1998.
TABLE L4 Budget Inflexibility (Fixed Categories as % of Revenue)
Region/Country                    1977-1985            1986-1994
Industrial Countries                 39                   39
Latin America                        29                   37
South Asia                           54                   69
Eastern Asia and Pacific             37                   34
Sub-Saharan Africa  .                27                   41
Eastern Europe & Central Asia        35                   20
Most Inflexible Countries
Democratic Republic of Congo         39                   122
Brazil                               37                   99
Guatemala                            52                   40
India                                81                   91
Note: Figures reflect period averages of the results for each year: (Defense outlays + interest payment
+ transfers to other levels of government)/(total revenue & grants - grants - public
entrepreneurial & property income). Data for Guatemala are for 1995 and 1998.
Sources: Huther, Roberts and Shah (1997), World Bank staff estimates.
1.15   Overall Progress in the Privatization Program. The Government's privatization
program is almost complete (Box 1.3). The mail and railroads, under concession to foreign
operators, are showing   improvements in   service delivery.   In the   electricity  and
telecommunication sectors, large parts of the state enterprises have been privatized and a
minimum competitive regulatory framework has been put in place. Although regulatory agencies
have sufficient operational and financial autonomy, and appear adequately staffed and financed,
their institutional capacity still requires considerable strengthening in terms of global expertise
and technical capacity. The Government is also starting targeted programs to extend electricity
and telecom services to rural areas with private sector participation. Power coverage has
increased from 52 percent in 1995 to 68 percent at present, and is projected to be as high as 90
percent by 2002. The telephone penetration rate should increase from 4 percent to the LAC
average of 10 percent by 2002. As tariffs in both sectors have been rising, there have been some
concerns about the lack of competitive pressures in these markets and the effectiveness and
mechanisms used by the Regulatory Power Commission to set tariffs.
1.16   From expected privatization revenues totaling over US$1.4 billion between 1998-2001,
about 60 percent had been received by mid- 1999 (4.3 percent of GDP), of which the Government
devoted only US$112 million to repay short-term domestic debt. TELGUA's privatization,
however, generated pressure on the Quetzal in late 1998, as US$136 million of the required down
payment by local investors was purchased in the domestic foreign exchange market. Since
September 1998, the BOG has heavily supported the Quetzal by selling more than US$688
million (more than the privatization proceeds obtained in 1998). More seriously, and as discussed
below, resources mobilized by the privatization program, appear to have made it harder to resist
pressures to adopt an expansionary fiscal stance in the lead up to national elections.


9
Box'1.3 Guatemala Privatization Program       D.      The    Main     Challenges     of   an
Incomplete Agenda
+   Power   The  electncit3  distribution  company
(EEGSA). was sold for USS520 million to Iberdrola  1.17  Macroeconomic  Instability.     On
(Spain) Electricidad de Portugal and TPS (US) on  April 1999, the  Government approved    an
July 30, 1998 The other distribution company  extraordinary budget increase of Q3 billion, to
(INDE) i4as sold for USS101 million to Union
Fenosa (Spain on December 22, 1998
+   Telecommunications. The   telecoms  company  result of strong criticism  and concerns, the
JTELGUA) was sold for USS700 million to LUCK  Authorities first announced on May 1999 that
a Central-Amencan holding company on November  effective outlays-other than domestic debt
10. 1998 Payments w%ill take place in 3 stages.
USS200 million at signing. and USS150 and
US$350 million plus LIBOR+3 in interest 18 and 36  billion. Even such a reduced package would
months later  The bidding process has been   have   had   serious  medium-term    economic
challenged on the grounds of lack of transparency.  effects and confronted the new Administration
+ Railroads The railroad compan) (FEGIA) ws in early 2000 with a difficult macro picture: (i)
conccssioned to Railroad Development Corporation
(US), which was expected to invest US$10 million
in 1999.                                     3.2 percent of GDP, requiring a relatively
Mail The Directorate of Mail and Telegraphs was  severe fiscal compression in 2000; (ii) the
leased for 5 years to International Postal Service increased spending would likely exacerbate
OIPS? Canada on September 16. 1998.    The   inflationary pressures and increase pressure on
Go%ernment retains control of postal fees.
State Banks The National Housing Bank (BANVI) the Quetzal; (iii) gross international reserves
is in the process of being liquidated.       would decline below a vulnerable 2.5 months
4P  Airports  The Government is evaluating 5 pre-
qualified operators for the concessioning of La  authorts contied   to   re      on   et
Aurora International Airport (Guatemala City) and  a        in               y
Santa Elena International Airport (Flores, El Pet6n).  intervention  foreign exchange markets rather
*e  Ports  The Government contracted an in       than indirect monetary policy instruments to
bank to auction under a 25 year contract new port  defend the currency; and (iv) growth would fall
facilities in Quetzal and Santo Tomas        below 4 percent if domestic interest rates rose
*   Agriculture. The silos of the National Institute of  by a range of 3-5 percentage points as a result
Agncultural Marketing (INDECA) were sold on
August 3. 1998 for US$5 4 mllions            of open market operations to sterilize excess
Roads. The Government prepared 5 road segments  liquidity, and/or spreads rose due to higher
for concessioning but received no offers     country and exchange risks.     As the budget
:   Natural Gas. The Government is seeking private
in%.estment for a 1.000 km  gas pipeline linking
Nlexico. Guatemala. El SaNsador and Honduras. maktitwsdrgedoSpebr19                      .
1.18    The  Fragile Fiscal Base.     The key
challenge to fulfill the Peace Accords remains increasing tax revenues (Annex A). Between 1995
and 1998, the tax ratio increased by about 1 percent of GDP-barely one-fourth of the Peace
Accords target-and this increase was partly due to a temporary asset tax. In 1999, the tax ratio
will increase 0.4-0.5 percent of GDP, but most additional revenues will arise from March and
September 1999 tax amnesties (about 0.3 percent of GDP) as the Government decided: (i) not to
adjust tax rates in the lead up to the elections; (ii) place most of its hopes for additional revenues
on improved tax administration through the newly-created Superintendency of Tax
Administration (SAT); and (iii) convene a National Fiscal Pact to reach a consensus on longer-
term fiscal reforms that could transcend political differences.
1.19    A major improvement in the tax revenue performance is critical for peace consolidation
from 2000 onwards, but it is also required to ensure macro stability and higher growth. A passive
scenario, including improved revenue collection expected through the SAT (0.4-0.5 percent of
GDP), would result in a fall of the tax ratio of 0.3 percent of GDP and a fiscal deficit of 3.1
percent of GDP in 2000 (Table 1.5). Upon its arrival, a new Administration committed to


10
implementation of the Peace Accords would face difficult choices: raising additional revenues,
financing expenditure targets agreed in the Peace Accords with expensive domestic debt, further
depletion of privatization proceeds, and/or closing the fiscal gap through substantial cuts in non-
Peace social expenditures.
Table L5 FISCALSCENARIOS
1995       1996       1997      1998>      1999,     2000t
(As percent of GDP)
Central Government
Revenues                                8.6       9.2        9.2        9.8       9.9        9.9
Taxes                                7.9        8.7        8.8       8.9        9.4       9.1
Other revenues                       0.7        0.5        0.4       0.9        0.5       0.8
Total Expenditure                       9.4       9.2        10.1      12.2       13.6       13
Social Sectors                       3.9        3.8        4.4        5.9       6.5        6.1
Education                            1.7        1.6       1.8        2.2       2.3        2.5
Health                              0.9        0.8        1.0        1.1        1.2       1.3
Other'                               1.3       1.4        1.6        2.6        3         2.3
Economic Infrastructure & Serv.2      1.7       2.1        2.8        2.9       2.8        2.8
Defense and Public Order              1.3        1.1        1.1       1.2        1.1       1.2
Defense                              1.0       0.8        0.9        0.7       0.7        0.7
Public Order                        0.3        0.3        0.3        0.5       0.4        0.5
Public Debt Interest                  1.2       1.2        0.8        1.1        1.4       1.6
Administration and General Services   1.3       1.0        1.0        1.1        1.2       1.3
Overall Balance                        -0.9       0.0        -0.9      -2.4       -3.1       -3.1
Statistical Discrepancy                 0.3       -0.2       0.4       -0.1        0.0       0.0
Central Government Deficit             -0.6       -0.2       -0.5      -2.5       -3.1       -3.1
Memo
Rest of SPNF                            0.7       1.3         1         0.8       0.7        0.7
BOG losses                             -0.9       -1.2       -0.8      -0.3       -0.2       -0.3
Combined Public Sector Deficit         -0.8       -0.1       -0.3      -2.0       -2.6       -2.7
Source: World Bank Staff estimates; p preliminary; f forecast
' Includes housing urban development, community development and social service.
2 Includes rural infrastructure and development. Excludes VAT returns (0.5% of GDP for 1997 and 1998).
Note: Additional recurrent costs for a minimum of Q800 millions required by institutional peace programs
1.20    A deficit-growth-gap model (World Bank, 1996) was used to estimate the kind of fiscal
effort that would be required. Based on projected deficit and growth figures for 1999, the fiscal
effort required to bring the combined fiscal deficit to a sustainable path is between 1.5-1.9 percent
of GDP. In the arithmetic of fiscal accounts, a fiscal deficit is unsustainable if its relationship to
GDP growth is higher than the public debt/GDP ratio, i.e. it is under-financed. Sustainability
improves as GDP growth increases or the fiscal deficit decreases or, preferably, both (Annex B).
In Guatemala, the fiscal stance improved up to 1997 as a result of faster growth with low fiscal
deficits (Table 1.6). Thereafter, the combination of high fiscal deficits with slower growth has
weakened the fiscal situation. In 1999, the fiscal deficit-to-GDP-growth ratio (deficit after-grants
equivalent to 0.4 percent of GDP) is projected to be more than three times higher than the debt-to-
GDP ratio (21 percent). Assuming growth remains at 4 percent, to bring the deficit back to a
sustainable level (0.7 percent of GDP) would require a budget cut of 1.9 percent of GDP, that
would need to be mostly implemented in the first half of 2000. An alternative "rule of thumb"


11
would require a deficit equivalent to its external financing, which implies a projected cut of 1.5
percent of GDP in 1999.2 As the fiscal effort required is already significant (it does not, however,
include budget provisions for contingent liabilities), and experience shows that a fiscal
adjustment approaching 3 percentage points of GDP is politically difficult to implement in
developing countries (Dinh, 1995), reaching a political consensus on the need to take strong
revenue measures early in 2000 through the National Fiscal Pact is essential.
TABLE 1.6: Sustainability of Public Debt and Fiscal Adjustment
(Percentage of GDP)
Fiscal      GDP       Potential        External     Domestic   Actual          Fiscal
Year          Deficit    Growth      Debt/GDP         Debt**        Debt**   Debt/GDP        Effort
(1)         (2)          (%)            (3)          (4)         (%)           (5)
1993             2.5         3.9           64.1          19.6         16.6        36.2         1.1
1994            2.3          4.0           57.5          18.7         14.4        33.1         1.0
1995             0.8         4.9           16.3          14.9         13.7        28.6           -
1996             0.1         3.0            3.3          13.0         13.0        26.0
1997             0.9         4.3           20.9          12.2         10.7        22.9           -
1998             1.8         4.7           38.3          11.5          9.1        20.7         0.8
1999            2.6          3.6          72.2           11.5          9.0        20.5         1.9
1993-95           1.9         4.3           46.0          17.7         14.9        32.6         0.5
1997-99           1.8         4.2           45.2          11.7          9.6         21.4         0.9
3ource: worM  =anK RM HMr STW esMMes and runes S(1999).
* Combined fiscal deficit, * * overall public debt (including BOG)
1.21    Dealing with Fiscal Stress.      Guatemala appears to be a case where privatization
proceeds have fed fiscal illusion. A fiscal adjustment is an illusion when proceeds of asset
decumulation (privatization) are used to lower the budget deficit or reduce public debt liabilities,
but leaving the Government's net worth constant (Easterly, 1999), or negative when offset by an
increase in hidden contingent liabilities (fiscal stress). It is now widely accepted that the fiscal
deficit should be defined conceptually as the change in net worth, including contingent liabilities,
despite the empirical difficulties in estimating it3  State asset decumulation should result in
efficiency gains, but when a government privatizes for fiscal reasons, i.e., instead of tax reform or
to finance public consumption, fiscal adjustment becomes an illusion if the change in the public
sector's net worth is constant or negative, as in Guatemala.
1.22    Since end- 1998, fiscal stress has significantly risen due to rising fiscal deficits and higher
contingent liabilities, mostly in the financial system, which raises concerns over Guatemala's
potential vulnerability to a twin--currency      and  financial---crisis.  In theory, large and
unsustainable fiscal deficits lead to reserve losses, as Authorities attempt to defend the peg, in
turn triggering a currency crisis. Empirical work, however, has found little evidence of a
systematic link between budget deficits and currency crises, but a significant one for banking
2 Using a primary-savings gap model, Funes (1999) estimates a 1.6 percent cut needed for filling 1998-99 fiscal gaps.
The Government's net worth is the sum of asset income (multiplied by r as both the rate of return on its assets and the
interest rate on its liabilities), minus debt interest (conventional fiscal deficit), asset de-cumulation, debt accumulation,
and hidden contingent liabilities accumulation. The net worth of a solvent Government must be greater than or equal to
the present value of its future consumption (discounted by a factor p). After privatization, there is no positive change
in net worth if the Government uses proceeds to reduce debt interest (lowering the deficit), but increases hidden
liabilities (fiscal illusion). As an irresponsible government values consumption today very highly relative to future
consumption (high p), the change in net worth following asset de-cumulation may also be negative if p is greater than r,
i.e., the Government disinvests in its future revenue capacity to finance consumption today.


12
crises as precursors of currency crises (the twin crises) as well as on the transmission mechanisms
between the two (Kaminsky, Lizondo and Reinhart, 1997; and Kaminsky and Reinhart, 1999). It
may be premature, however, to abandon the fiscal explanation of currency crises as the
conventional fiscal deficit is an unreliable proxy for describing the actual fiscal situation of a
country under significant fiscal stress as measured by the size of contingent liabilities. If these
materialize, they can quickly produce a large fiscal drain (Kharas and Mishra, 1999). Contingent
liabilities are explicit or implicit depending on the extent to which the Government is legally
required to cover liabilities in the event of default. (Box 1.4). In the case of Guatemala,
contingent liabilities have worsened due to: (i) increasing fiscal and external imbalances, with
fiscal and current account deficits of 3.1 percent and 5.5 percent of GDP respectively, resulting
from loose monetary policy and Hurricane Mitch in 1998; (ii) real exchange rate misalignment-
a 27 percent real appreciation in June 1998 with respect to its average 1992-95; (iii) adverse
terms-of-trade due to a marked fall in export prices (coffee and sugar) in 1999; (iv) a credit
crunch that has affected the financial system during the second semester of 1999, preceded by a
credit boom in 1998; (v) a reversal of short-term private capital inflows, as real domestic interest
rates fell; (vi) an ensuing economic slowdown; and (vii) the use of privatization proceeds to
finance an expansionary fiscal policy in an election year (Annex C).
Box 1. 4: THE FISCAL RISK MATRIX
Uablrii   Direct cotdignon in in eent)            Continen (oblpr ion if a panicular event oours)
- Staegiarantes tor nonsovereig bornowingand obligations
Espicit       -  F..rmgnd dorneit soreinghorrowm  obligtons issued to subnational Fp%emments and puhb
floans contracted and secunte issued b  and pn%azescetorencities tdevelopmern banks
Go%emment        the central g%anmunt                 INDE               INFOM
Lubahi        -  Expendrtures hs bud@m law              PUERTOQULTEZAL     EMPAGUA
recognLued by    Budgmevpenditures lepil, binding in the  GUATEL           BANGUAT
law or contrws   longrei                               EANVI             CORFINA
ci% 1 erv ax p ensions and IGS        M UNICIPALIDADES
sern i  pensions -Tealth programs    - State insurance schenes for deposits
Impliit        Future recurrent owsts of public      - Default of asubational government and public or pnvae
A 'moral"        investment pro.s                      entity on non-guardntid debt and other Itabilaes
obligation of he  Future public pensioni i sopposed to  INDE             INFOM
.swi)cmmeni Tht  1n il scr% m* pentsiom ifnot required b%  PUERTO QUETZ 4 L  EN PAGUA
rMnk retlect   la                                     GUATEL             BANGUAT
pubbe: epecta-                                          BANVI             CORFINA
tiions and    -   ocial scn'. schmes if not required b'  MUNICIPALIDADES
pressura. b%     Lr.%                                    Cleanup of the liabilities of pmatizd entities
mlcrcst P).up                                           GUATEL             INDE
-  uture hcath care financing if not  Bank fadure(beyond state insurancei
speciied b% laxn                       Defaut of the central bank on ms obliLu ions (foragn cichanjr
conracts. currecv defense. balance of payment. stabiit
aifFocal auhorntie- not thecentrdl bank
1.23    Contingent liabilities arising from    the financial system   have soared. Severe solvency
problems in at least 8 commercial banks, the failure of 17 financial companies and the slump in
the economy and stock market reflect the considerable stress affecting the financial system in
1999 (Lemus, 1999). In addition to factors depicted above, it also results from: (i) deterioration
of the agricultural portfolio, due to Mitch and low export prices; (ii) losses from the bankruptcy
of informally linked agro-export financial intermediaries, hit by the credit crunch and bad
investments in Russia; (iii) the loss of public confidence reflected in the flight of deposits from
weaker financial intermediaries to larger commercial banks and the dollar; and (iv) shortcomings
in prudential regulation and the ability of the Superintendency of Banks to intervene insolvent


13
institutions. These pressures emerged forcefully in 1999, when BOG heavily intervened with
more than US$375 million (one fourth of December 1998 net reserves) to counter three
speculative attacks against the Quetzal in January, May/June and August, and provided
emergency financing (US$233 million) to illiquid commercial banks.
1.24   The   first step  toward  fiscal
Figure I.4 Contingent Government Labilities are Specially Iigh  discipline is to identify the sources of
fiscal stress and estimate the likelihood
of their materialization in the budget.
Through    end-1998,   the   size   of
Czch Repub,I
O                                               Guatemala's contingent liabilities was
,-  wa eie         estimated at 9 percent of GDP, arising
from: sovereign guarantee to public or
a.ourerent--       sub-national external debt (30.2 percent),
mcl                         e"" "bailout of commercial bank liabilities
(29 percent), state debt to the health
insurance system  (25.4 percent), state
social  security  pension  fund  (10.5
uat-,                                            percent) and   BOG    losses including
sterilization costs (4.9 percent) (Funes,
1999). Financial system liabilities are
not reflected in the budget, but if they were fully committed, they would account for about a third
of total contingent liabilities, a low figure by international standards (Figure 1.4) As the larger
the size of the financial sector and the level of intermediation, the greater the contingent liability,
such a small figure is explained by: (i) the low depth of financial intermediation relative to the
size of the economy, with a stable M2/GDP ratio averaging 2 percent of GDP in the 1990s-
among the lowest in LAC despite the adoption of financial sector reforms in the early-to-mid-
1990s; and (ii) high administrative costs in the banking sector, averaging 7 percentage points
during 1995-98, among the highest in LAC and twice the average of developed countries (ABG,
1998; Burki and Perry, 1997). Under present conditions, the Government's decision to postpone
closing insolvent banks and writing-off bad loans for electoral reasons, might increase the fiscal
costs of an eventual bailout.
1.25   Minimizing Domestic Debt in Dollar-Linked Bonds.         Domestic debt ratios have
improved dramatically during the 1990s. However, the proposed fiscal expansion without
additional tax measures, is likely to adversely affect the term structure and currency denomination
of domestic debt. The domestic debt-to-GDP ratio halved between 1993 and 1998 (Table 1.6), the
domestic debt service to GDP (excluding repurchases of Treasury bonds) decreased from 1.4
percent in 1995 to 0.8 percent of GDP in 1998; whereas the share of less than six months bonds in
total domestic debt decreased from 56 percent in 1995 to 19 percent in 1998 and the 1-year+ term
bonds tripled to 61 percent between 1998 and 1995 (Figure 1.5). These improvements were due
to: (i) the fall of nominal interest rates by 5-7 points between July 1996 and December 1998,
partly due to the lowering of reserve requirements as the Authorities relaxed monetary policy; (ii)
the decision by the Authorities to minimize open-market operations so as to reduce BOG losses
(from 1.2 percent of GDP in 1996 to 0.3 percent in 1998), which contributed to lower domestic
Standard & Poor's methodology divides the banking system into five risk categories, based on their vulnerability to
asset quality pressures during periods of economic slowdown or recession and, under the worst case scenario, estimates
the level of direct and indirect costs to the Government and the economy of potentially problematic risk assets.
Guatemala's range of potential gross problematic assets as a percentage of domestic credit to the private sector and non
financial public sector (NFPS) enterprises is 10-20 percent, and the upper and lower cost bounds are 2 and 3 percent of
GDP (Annex D and Lemus, 1999), which is low by international standards.


14
interest rates; (iii) the lengthening of the maturity of new bond placements; and (iv) the decision
to repay expensive short-term domestic debt with privatization proceeds (about US$112 million
or one fifth of privatization revenues).s Such improvements, however, mask a steady expansion
in dollar-linked bonds, which has introduced a strong incentive to avoid a nominal depreciation of
the Quetzal. Dollar-linked bonds have rapidly risen from 6 percent to 26 percent of domestic
debt between 1995 and June 1999 (Funes, 1999). This has resulted not only from Guatemala's
successful return to international capital markets with a placement of US$150 million in 1997,
but also from the accelerated placement of short-term Quetzal-denominated bonds-with
exchange risk guarantee, similar to Mexican Tesobonos-with foreign commercial banks for
about US$255 million in June 1999. In the first half of 1999, more than half of the increase in
bonded debt was dollar-linked.
Figure 1.5 - Domestic Debt Restructuring
Dxnestic Oft Onpoeitio                       Dnestic Dft Qmpositio
61linuft,                                                              4 n
in in~
61%
1.26   Recommendations.     Strengthening the macro stance is fundamental to reduce
Guatemala's vulnerability to speculative attacks and financial stress in the short-term, and to
sustain priority post-conflict spending in the medium-term. Following years of expenditure
restraint, social and basic infrastructure investment has increased, but these levels are not
sustainable with Guatemala's present tax base. Peace targets are attainable, but a three-pronged
approach is recommended to ensure their sustainability. First, there is an urgent need to reduce
macroeconomic vulnerabilities that can derail the reform process and peace implementation.
Second, Guatemala should consider adopting a medium-term expenditure framework (MTEF) to
consolidate and deepen recent progress in public expenditure reform and its links with peace
implementation. Third, and as part of a comprehensive MTEF, there is a need strengthen the
fiscal base to ensure appropriate financing of peace expenditures and continued improvements in
spending patterns.
1.27. Reducing Macroeconomic Vulnerability. This would require adopting a sound and
credible stabilization and adjustment program from the start of the new Administration, aiming to
strengthen the fiscal position and, through its effect on aggregate expenditure, reduce the
unsustainable current account deficit, as well as measures to deal with fragility in the financial
5 The Government had originally committed 50 percent of privatization proceeds to repay domestic debt.


15
system. The commitment to macro stabilization goals would be strengthened if they are part of
an MTEF. The stabilization and adjustment effort should include:
>  Targetingfiscal and external current account deficits not to exceed 1 percent and 3 percent of
GDP respectively, which could include a fiscal policy rule (backed by the Fiscal Pact)
targeting a fiscal deficit below 1 percent of GDP.
>  Maintaining a tight monetary policy during the adjustment period, through tight control of
private domestic credit expansion and the more effective use of indirect monetary policy
instruments (open-market operations). Such policy would contribute to reduce excess
liquidity episodes, minimize open market operations to sterilize them, keep domestic interest
rates from rising too high and supporting a flexible exchange rate policy.
>  Maintaining an effective neutral real exchange rate policy. Further depreciation of the
exchange rate is likely to be required to reduce the external current account deficit, especially
since the stabilization costs of unsuccessful attempts to maintain a quasi-fixed exchange rate
in 1999 have appeared too high in light of reserve losses, rising domestic interest rates,
reversing private capital flows, adverse terms of trade and the elections.
>  Rebuilding the external position to a 1/1 reserve/monetary base ratio with incoming
privatization proceeds. Reserves should cover a higher proportion of short-term financial
sector liquid liabilities, mostly in foreign currency, which are now roughly equivalent to the
monetary base. As Calvo (1995) has shown, countries with sound fundamentals but weak
banking sectors and high capital mobility, may still face speculative attacks. Hence, a reserve
target of 3 months of imports may not be sufficient, especially if the Authorities continue to
attempt to maintain a quasi-fixed exchange rate policy. A 1/1 monetary base/net usable
reserves ratio requires about US$600 million over present reserve levels (Edwards, 1999).6
>  Quickly resolving the severe solvency difficulties of the banking system, by requiring
increases in capital, in line with the recently approved Banking Law, and promoting closure
or merger of banks that cannot comply.
>  Minimizing financial contingent liabilities by strengthening financial regulations and
supervision, and establishing contingent sources of liquidity to gradually recover public
confidence in the solvency of the financial system. Implementation of the new Banking Law
will contribute to lower systemic risks by setting limits on related lending, higher capital
requirements and establishing financial crime, but additional reforms are required, including:
an insurance deposit scheme, open disclosure of asset risk valuation and external audits,
consolidated prudential supervision-including off-balance sheet and off-shore operations-
bank merger laws, the creation of a Risk Center (Central de Riesgos), and enhanced powers
for the Superintendency of Banks to impose fines on financial institutions that violate
prudential norms.
1.28   A Medium-Term Expenditure Framework. The MTEF is a policy tool that integrates
the three levels of key institutional arrangements required to ensure sound and more predictable
fiscal management:   (i) aggregate fiscal discipline under a monetary program  to set
formal/informal rules/targets on revenues, expenditures, fiscal balance, financing and contingent
liabilities; (ii) sectoral allocations based on strategic priorities and external financing availability;
and (iii) efficient and effective operational financial performance, which usually implies budget
decentralization and performance monitoring mechanisms.  Setting rules, targets, sectoral
allocations and monitoring mechanisms has the following benefits: (i) promotes credibility in the
monetary and fiscal program; (ii) improves the allocation and efficiency of spending; (iii) allows
the annual re-prioritization of policies, target areas and beneficiaries; (iv) improves the
investment climate by enhancing the predictability of taxes, fiscal balances, public debt and
6 The IMF employs the term "net usable reserves" excluding BOG's creditor position with Nicaragua for about
US$206 million. Present gross reserve levels are about US$1,150 million (2.8 months/imports of G&NFS).


16
interest rates; (v) enhances budget management transparency, allowing Congress and civil society
to influence budget priorities and monitor government performance. Although adoption of an
MTEF in Guatemala would be a complex undertaking, the existence of a well-developed financial
management system represents a considerable advantage (para. 2.6). In the case of Guatemala, an
MTEF would be a powerful tool to reconcile stabilization pressures with the need to protect as
much as possible peace-related expenditures and the recent progress in shifting expenditure
patterns. This would reduce the risk that the stabilization costs fall disproportionately on peace
programs. It also has the potential to become, over time, an effective instrument to re-prioritize
and re-target peace-related expenditures and to allow timely monitoring of public sector
performance.
1.29    Strengthening the fiscal stance to deepen and sustain expenditure reforms. The
Government would need to consider:
>   Increasing tax revenues in line with rescheduled peace targets to be agreed by the Fiscal
Pact (para. 3.9). Early actions on the tax front are needed as the experience in Guatemala
shows that if an incoming administration does not move quickly to raise revenues, it will be
very difficult or impossible later. Urgent measures should include tax rate increases,
elimination of tax exemptions, a more effective tax administration by the SAT,7 tax code
reforms to strengthen SAT powers and an increase in the number of judicial tribunals dealing
with tax defaults. Other possible measures include: gradual phasing-out of taxes with
marginal revenue impact (e.g., stamps, income tax on patrimonial property) or transfer of tax
collection responsibility to a more appropriate level of government with shared responsibility,
e.g., a reformulated IUSI tax to municipalities, exit tax to airports, vehicle taxes to COVIAL,
review of VAT refund mechanisms to prevent abuses and eradication of tax amnesties.
Box L5 The Medium Term Expenditure Framework (MTEF)
The Case of South Africa and the United Kingdom (UK)
Thanks to its IFMS (Chapter II). Guatemala has now the capacity to develop an MTEF. It could become an
extremely valuable tool not only for re-establishing fiscal stability and protecting expenditure reform gains. but
could also form the basis for the medium-term fiscal consensus that the National Fiscal Pact is attempting to forge.
South Africa and the United Kingdom have developed MTEFs.
The MTEF of the South African Government sets out its reconstruction and development objectives. It is
developed by the Government under agreed principles of adequate and predictable taxation, fiscal sustainability and
prudent management of fiscal risks (essentially state guarantees). It consists of: (i) a statement of fiscal policy
objectives and targets; (ii) an integrated medium-term macroeconomic and fiscal forecast; (iii) estimates of
expenditure by ministries and agencies. which become hard budget constraints; and (iv) reliance on simple rules,
e.g.. the debt ratio cannot rise or exceed a specific limit It is not multi-year budgeting, but annual budgeting within
a 3-year framework. Regarding contingent liabilities, it also features: (i) a statement of public financial assets and
liabilities on a cash and on an accrual basis, with an ex-ame recognition of contingent liabilities and actual liabilities
per ministry, and their risk; (ii) explicit fiscal arrangements between national, provincial and local governments in
MTEF projections (the national government funds 95 percent of their revenues); and (iii) strict guidelines for issuing
state guarantees, e.g.. local governments are not permitted to budget a deficit or guarantee fees are charged to
discourage reliance on central government borrowing.
The UK's approach to the MTEF also includes an independent review of macroeconomic assumptions performed
by the OECD and an unallocated reserve of 2 percent of total budget. to cover unforeseen events, including realized
contingent liabilities. Claims on the reserve fund are severely restricted, decided at the ministerial level, and annual
net savings are credited to next year's budget
7 For the SAT to meet its ambitious collection goals it needs to: (i) define a comprehensive tax collection strategy; (ii)
develop a new taxpayer registry; (iii) create an urgently needed special taxpayer unit; (iv) design and implement a
unified internal and external control system; (v) improve its commercial bank-supported tax collection system; and (vi)
double the number of its auditors (Dos Santos, 1999).


17
>   Maintaining intra-sector priorities and increasing social and basic infrastructure spending to
75 percent of budget expenditure, as part of an MTEF and in line with quantitative peace
targets, i.e., priority on pre-primary and primary education, preventive health, low-income
housing and rural infrastructure and development, with improved targeting on the poorest
regions, departments and municipalities.
>  At the macro level, maintaining a minimum ratio of capital to current expenditure, also
known as r coefficient, of 0.55. In the short term, this should imply a hiring freeze in the
public sector, except in education to meet peace commitments. At the project level, given
low tax revenues and significant donor-driven investment programs, evaluating the r
coefficient of existing and new projects rigorously is essentialto prevent counterpart funding
shortages, adequately budget future current spending required by basic social investments,
and weeding out unproductive programs.8
>  Avoiding continued financing of current expenditures with future privatization proceeds
(fiscal illusion) and, instead, first retiring short-term domestic debt gradually, so as to
prevent liquidity shocks and, then, financing investments that will produce significant
medium-term social or economic returns. Future privatization proceeds still have the
potential to destabilize the economy unless they are properly managed. An option to consider
is the creation of an investment fund or trust fund (fideicomiso) and using only interest earned
to finance priority investments, as in Panama's Trust Fund for Development.9
>   Shifting the present 1-to-1 ratio between external and domestic public debt to 2-to-1,
continuing to reduce the size and lengthen the maturity of domestic debt, while keeping
external debt low. Reducing domestic debt is essential to enable the Authorities to lower
reserve requirements and reduce pressure on domestic interest rates.     Domestic debt
restructuring requires: (i) the creation of a Public Credit Unit at MIFIN to effectively manage
and monitor debt; (ii) enhanced coordination of open-market operations between BOG and
MIFIN, by making a clear distinction between short-term BOG securities issued for liquidity
management and medium-term Government bonds issued by MIFIN to finance the public
sector deficit; (iii) reducing BOG losses to a minimum in line with the amount of BOG open
market operations; (iv) the gradual use of 50 percent of privatization proceeds to fully repay
short-term debt,10 and minimize medium-term debt to levels required by cash flow
management by MIFIN; and (v) keeping the share of dollar-indexed bonds at reasonable
levels (below 30 percent of total domestic debt), not only because their sterilization is
expensive, but because of their exchange risk.
> Improving targeting on the poorest. Taking advantage of the IFMS and GIS (para. 2.10), the
minimum targets should be 60 percent of Central Government spending allocated outside the
capital, and 50 percent of spending by the social funds on the poorest regions, departments
and municipalities.   This involves continuing to encourage community and private
participation not just in project preparation and sub-contracting, but in co-financing local
infrastructure and services through community involvement during implementation. The
focus and coverage of operations should improve by the expansion of the new pilot models of
local service delivery under implementation in San Marcos and Huehuetenango. Enhanced
International experience suggests as selected r coefficient per type of project for developing countries: 0.3-0.94 for
primary schools, 0.29-0.67 for rural health centers, 0.86-0.94 for rural roads, and 0.60-0.92 for rural development
Frojects (Pradhan, 1996).
By law, privatization proceeds in Panama are invested in the Trust Fund for Development in liquid and low-risk
assets. The Authorities can only use the interest earned by the Fund (US$43 million in 1998) to finance selected
frojects. Total assets in the Fund had reached about US$1.3 billion by end-March 1999.
Assuming that 50 percent of 1998 privatization proceeds would be devoted to repay domestic debt, Funes (1999)
estimated that net public savings from domestic debt repayments would have become positive and significant (0.2
percent of GDP) from year 2000 onwards, as sterilization costs in 1999 would have been equivalent to the sum of
principal repayments and interest rate savings.


18
targeting should be accompanied by adequate monitoring mechanisms (para. 3.10).
Integrating the social funds and the municipalities to the IFMS is essential to promote their
transparency, facilitate their supervision and enhance their capacity to target the poor.
> Eliminating distortions that emerged following Mitch in the division of labor among funds.
Promoting consolidation rather than further dispersion and institutional fragmentation by
creating more social funds is essential. The immediate phasing out of low-performing
funds--other than the three big ones FIS, FONAPAZ, FSDC and, perhaps, FOGUAVI-and
increased coordination and specialization of the remaining ones should lead to the adoption of
uniform technical standards, preventing overlapping activities and speeding up project
approval and execution. Whereas the merger of smaller funds should be considered, care
should be taken not to create one large and administratively costly super-fund. Specialization
by type of project should prevail over departmental focus.



CHAPTER H
PROGRESS ON PUBLIC SECTOR MODERNIZATION
A.     The Origins of Reform
Box ILI The New Regulatory Framework
2.1    The signing of peace in December       4  Ec      B     L               cMfies
1996 generated strong pressures to modernize    fkioas a    rp     i    by Mi.4&y and
the role of the state-implementing the Peace     Secretariat and ss new regultiots for M.
Accords and advancing in the fight against    6  Orgmde Law of'&%e BWget (Decree 101-97)
poverty  would   not be   possible  without        n     the lejga frework for key financial
reforming the way the public sector performed
its functions.  Guatemalan social indicators     capol ad wrreu spending.
were among the lowest in LAC and were         0  k;deflm of Freamy Funciow (AG 14-98)
improving very slowly, reflecting persistent     s  Treury as the sic entity authorized to
under-investment in social services and basic   *   06,W ernmtpaymeam
infrastructure,  especially  in  rural  areas.              (
Wi1ndow to -speed up loan'approvaLg; the Grawt.
Governance   problems,   centralization  and     NArm  (AG - 389-97) sib  procedures for
inefficiency  plagued  most  public  sector      Y*Ming aram
activities. Anecdotal evidence from the social  4  IW' Lai (*wthcoming) wl provide a
sectors, for example, suggested:   massive       fimeYmk Awent for cwsoBdating onoing
overpayments for medicines by the public      o  pub&.        n   g   (           -ill
sector relative to market prices, woefully       establish a d6entraliz6d Nadonal Investment
inadequate   inventory   controls,  serious      Wstim  (NIS). s6tng preinvestment and
anomalies in   cash  management, endemic         e        norms. and lkn M to the MMS.
Procurewent Law (forthcomning) vall simplify
arrears to suppliers, little if any focus on     p          p          a
results, and an overwhelming distortion of       compatible 6ith internafional standards.
actual (vs. budgeted) spending in favor of the   Law   of dh    ComptrolLer's  Office-CO
Capital City and hospitals.                      (forwomnig) will provide finctional rutonomy
to te CO and support its administrative reform.
Togetker with the forthconAng Probity Law, it
2.2     The Government was aware that post-      s      h  reduce scope for corruption.
conflict attempts to promote poverty reduction,
while fulfilling targeted peace spending, could be frustrated by serious shortcomings on several
institutional fronts. On the revenue side, poor tax administration and weak enforcement resulted
in low tax compliance. The private sector successfully resisted new tax measures by arguing that
the public sector was inefficient, corrupt and unable to productively use additional revenues. On
the spending side, the public sector was excessively centralized, with a weak institutional and
financial structure, making it extremely difficult to effectively reorient spending toward priority
areas. This posed a serious challenge to the implementation of the Peace Accords, especially
those that required expenditure switching and improved targeting. On the civil service side, the
public sector was overstaffed, with an uncompetitive salary structure that made it difficult to
attract competent and motivated staff.  These constraints contributed to weak governance
throughout the public sector, exacerbated by inadequate access and inefficiencies in the judicial
system. In short, an inefficient and ineffective public sector posed a formidable obstacle to the
implementation of the Peace Accords.
2.3    Conscious of these weaknesses, the Government adopted a comprehensive public sector
modernization program focused on six key areas: (i) tax administration reform; (ii) privatization
of public enterprises; (iii) institutional and financial expenditure management reform; (iv) civil
service reform; (v) decentralization; and (vi) judicial reform (World Bank, SF996a). The first two


20
components were discussed in Chapter I. This chapter evaluates progress in implementing the
Government's public sector modernization program, focusing on financial management and
institutional reforms, progress in decentralization, and the need to deepen reforms in the civil
service and governance.
2.4    The New Framework. A key element of the Government's public sector modernization
program has been the adoption of a new framework supported by new regulations (Box 1.1). The
new framework has two building blocks: a horizontal one, which would restructure the
institutional macrostructure of the public sector, and a vertical one, which would modernize
financial management through an integrated financial management system. After three years of
reform, there has been remarkable progress in financial management but only partial and largely
ad hoc progress on reforming the institutional macrostructure.
2.5    Progress in reforming the institutional macrostructure has been partial (CIEN, 1999c).
Under the 1996 Program for the Modernization and Strengthening of the Executive, the
Government intended to cut the number of ministries by a third, eliminate redundant ministerial
units, de-concentrate their functions outside Guatemala City, and transfer most of its public
investment execution functions to sub-contracting schemes with the private sector. Accordingly,
a new Law of the Executive was approved in 1997, but lack of consensus within the Government
resulted in only a relatively minor redefinition of ministerial functions and the establishment of
only ad hoc coordination mechanisms among the social funds. No single ministry was
eliminated, while pilot and partial de-concentration took place only in the Ministries of Education
and Health. Even these efforts were more due to the need to meet IFMS technical requirements
rather than to the effective transfer of decision-making power to lower level ministerial units.
Reforms were more successful, however, in redefining the public/private service provision mix in
a number of areas, including road and bridge rehabilitation, school construction, and rural
electricity and telephone provision.
2.6    The IFMS.    Progress in reforming financial and control management has been
impressive, though significant challenges remain. The new IFMS (SIAF by its Spanish acronym),
is a modern public sector financial management system aiming to increase the efficiency,
accountability and transparency of public spending and support the decentralization to line
ministries of the primary responsibility for managing sector resources to help improve the
delivery of public services. It combines efforts in the key areas of budgeting, accounting, cash
management, debt management, auditing, and procurement (Box 11.2). The principal integrating
factors for the system are a commonly shared and reliable data base, standards and procedures for
recording and reporting financial data in the accounting sub-system, and an open mini/
microcomputer based information technology system capable of communicating the data across
the sub-systems. Full implementation of the IFMS permits a real time and single entry of data
into the system to all users. New legislation and norms help protect its coherence, reflecting a
common aim to improve the efficiency, effectiveness, and transparency of financial operations.


21
Box II.2 The First Steps of the MS          2.7     The main pervasive shortcomings
in public sector financial management and
In addition to the new legal framework (Box ILl), most of  auditing that the lFMS addressed were:
the design work in major subomponwnts has bci         financial     administration      highly
completed and is under implementation:
*   Budgeting. A new budget classification has been
designed and implemented- the 1998 b            ministries little scope to plan or manage
formulated with a new budget execution mainual based  their budgets and ad-hoc decisions;
on a methodology of programmling by results,    Li  financial management based on tight,
including physical and financial indicators;    d
*   Accounting. A new Plan of Accounts has been
developed based on the new budget               given revenue uncertainties and the almost
new accounting manualsa    accounting software;  non-existent  financial  capacity  of   line
training of staff was completed for te introduction of  ministries;
the new accounting system in 1998;
+   Cash   management.    A    monthly  cash-flow
programming system  has bm   a   t              an    outdated    and   inconsistent    legal
reflect budget execution projections and facilitate  framework;
timely paymtWs; the multipliciy of governmont cash Ll inefficient and administratively costly
accounts has been redoned.aiming to eventually create  procedures governing public fuids;
a single government aCouI Paymnt pnedires        financial  decision-making    based   on
have been simplified by reducing reliance on checks;
*   Procurement   A major study has been complet,  unreliable,   fragmented,   incomplete    or
legislation drafted and detailed plans developed for a  obsolete data;
complete reorganization of the public procurement  Li  disparate  information    technology,
system;
*   Financial management do-concentration. The
Government expanded the number of p1lot agencies to  way, leading  to  a  multitude  of non-
include the Ministries of Communications, Public  communicating systems within the public
Works, and Transport; and Foreign Affairs- pilot sector;
ministries (MOE and MOH armong them) now account  L  financial administration carried out by a
for 60 percent of public expenditure;
O   Information technology. An innovative, integrated
software system to support the new accounting system  adequate training or experience to perform
was developed and successfully tested; and      theirjobs;
"   Truaoing.  Over 1,600 civil servants have been  E   inadequate auditing of accounts and an
introduced to the new system and a training program
establishedthe sense of public accountability; and
. lack of public expenditure monitoring,
especially targeting on poor areas and priority needs.
B.      Early Benefits from Public Sector Modernization
2.8     Overall Efficiency Gains. After three years of reform efforts, several significant results
are emerging (Table 11. 1), with Guatemala now among the leaders in financial management
reform in the world:
"i Financial transactions are entered once into the public accounting system at the location
where they originate and reported instantaneously by Y2K compatible electronic means.
g Big reduction in prices paid for supplies (10-70 percent) due to a better procurement system
and shorter payment procedures, substantially cutting processing times and steps (eliminating
premiums built into prices to reflect inflation or bribes by suppliers to speed payments).
Li  Electronic flmd transfers have increased from near zero in 1996 to 50 percent of public sector
payments in 1998, and are expected to cover nearly all payments in 1999. This reduces the
time and transaction costs and lostdstolen checks.


22
TABLE H.1 IFMS Performance Indicators
A. Budget                                            1996               1998
Elaboration of quarterly report lag (months)        3               Real Time
Steps to register executed spending                150                 12
Budget specialists trained (No.)                    0                  540
B. Accounting
.    Public bank accounts (85% at BOG) -(No.)          1,300               600
Elaboration of financial report lag (months)       3               Real Time
Public institutions with integrated accounting (No.)  0                16
Accountants trained (No.)                          0                  486
C. Treasury
Revolving fwids integraited to unique account (No.)  0                100
Floating debt payment lag.(average days)           90                  3
Floating debt transactions A-B-C (No.)           100,000             40,000
Checks issued per month (No.)                   Thousands             <100
Bank's control of public salary payroll (%)        0                  100
D. Auditing
New norms issued/applied (No.)                      -              Coopleted
Auditors trained (No.)                             0                  '616
Internal audits (No.)                             363                N.A.
E. Procurement Costs (in Q)
Medicine suppliers (No.)                           160                 45
Basic list of medicines (No.)                     1,400                45
Distilled water                                    6.87                1.60
Clorhexidine                                       235                 131
Lidocaine                                         11.87               3.30
Metronidazol                                       4.14               2.25
X-ray film                                        10.31               4.23
Mammography services                               8.59               2.20
School desk                                       75.00               60.00
School cookie                                      0.30               0.25
Sou=: MIFIN
L  Once a payment is authorized by a line agency, MIFIN executes it within an average of 72
hours. Arrears to suppliers have been eliminated.
L  The unique relational database provides immediate and detailed information on all recorded
financial transactions, on cash and accrual basis, thus providing an audit trail, timely budget
execution and fiscal accounts information for managers. Legislators, private citizens, NGOs,
and other stakeholder can access proposed and executed national budgets at several computer
sites in Guatemala and through the Internet, thus providing information on the use of tax
revenues.
Li Software is being developed to track procurement and management of inventories and fixed
assets, with plans to make information on contracts and prices paid available on the internet.
c  Reduced scope for fraud and corruption: administrative discretion in payments has been
limited considerably; an audit trail exists instantaneously on all transactions available to
internal auditors and to the Comptroller's Office; the reliance on checks and paperwork in
general has been cut sharply; public procurement is now conducted on the basis of bids rather
than price quotes from a minimum list of authorized (often phantom) suppliers; prices paid
for goods and services can be rapidly compared across public agencies.
u The system is working closely with the new tax administration authority (SAT) and synergies
are being exploited to cross check activities of suppliers and private banking.


23
L  The IFMS also proved to be a valuable            Figure 11.1 Level of Budget Execution
disaster management tool following the
Defense;-10
Mitch emergency.                                        J_
Public Finance              175,
2.9    Effectiveness  Gains  in  Budget
Management.     Major improvements in
operational aspects of the budget occurred  Tnpo
during 1996-98.
o  Arrears on the floating debt, a major
budgetary distortion, were eliminated.
"  Shortages of counterpart funds to external
projects, a major bottleneck in the early     0    20   40    60    80   100
1990s, have been substantially reduced.  L -I
"  The level of budget execution by the
Central    Government    significantly
improved from 83 percent to 94 percent
of approved funds, with the Education
Ministry achieving 99 percent (Figure   Pso:
11.1), a dramatic increase over 50 percent
ta840
or lower rates prevalent in the early   go
1990s.                                   20.
"  Quarterly   budget    executed/planned
significantly improved  in  1998, as       I7
ministries quickly learned how to make
best use of their requested resources,
increasing from around 40 percent in the first quarter to over 50 percent in the last quarter
(Figure 11.2).
F Improvements in budget execution were partly due to significant increases in loan
disbursements-annual disbursements more than doubled from US$139 million to US$329
(Figure 11.3).
Li Through the ad-hoc government commission-CIACI-the Government was able to more
than halve the average lag between Board and Congress approvals of 1DB and World Bank
loans (Figure 11.4). By end-1998, the average lag had fallen to under 60 days. In the case of
CABEI, the approval process has not
Fie 1.e improved and continues to take about 6
Edxclmonths (Annex ILF).
140
12D       oa                             C.     Remaining Challenges in
-TTotal
OD1      ta~aes                           Implementation of the IEFMS
8 0;
S2.10  Although the IFMS has made a
*Fre1 promising start, during implementation a
40                              few   components-debt   management,
o auditing and procurement-were scaled
97       -     ...rd  down without causing basic changes in
1198 111969 1~9 7  1197 11197 IV97 198  it 98 11198 I'A8 199  1199 ov rl g as. D ay in te d b
Looue~ou a~tfleeh~g~bo.doGAI IN nddo~  -management component were due to the
Government's desire not to risk a major
change in the processing of external assistance that could disrupt aid flows supporting peace
implementation; delays in the auditing component were the result of disagreements over the legal
framework and degree of autonomy of the Comptroller General's Office; whereas delays in the


24
procurement component were the result of the Government's decision not to seek major
amendments to Guatemala's Procurement Law fearing it could affect the sale of TELGUA and
the rest of the privatization program. To ensure its long-term sustainability, the IFMS will have
to deal with these lags, as well as to address new challenges, including:
"  Key legislation is pending (Box 11.1).
"  The budgetary process needs to be further    Agum 11A - Extwal Loan Procedums, by
strengthened, especially by addressing:               SeWdod Donoe
unrealistic  macro  assumptions  and       4W
spending  targets,  overestimation  of     3                             *x
external disbursements, an  excessive         -                          WCB
number of budget expansions throughout      0
the year, insufficient monitoring of budget  0
performance, and   no  integration  of
spending   by   social   funds   and
municipalities. As discussed in Chapter I,
most of these issues could be effectively
addressed through the adoption of a
Medium-Term Expenditure Framework.
L3 A disconnected procurement subsystem requires overhaul. As a result of the reforms,
procurement is now based on bids, rather than price quotes from a list of authorized suppliers.
This reform has produced substantial savings in official purchases, but it remains
disconnected from the IFMS software, and significant institutional and legal changes are
required to strengthen competition and quality control.
Li Progress in the audit subsystem has been slower than anticipated. It still requires ex-ante
review of all transactions.
"  Local counterparts need to take over from the team of international consultants who have
implemented the new system. This will require intensive training and an appropriate salary
structure to retain qualified staff. The Government changed about 400 staff not meeting the
skill requirements of the new system and used some flexibility in pay categories to fund
higher salaries for new, more skilled staff.  Over the longer-term, more sustainable
arrangements are needed, which should be part of broader civil service reform.
" SEGEPLAN's Geographic Information System (GIS), designed to improve the geographic
distribution of investment, is not linked to, and its software is not compatible with IFMS.
2.11   Recommendations. Based on the early experience, the remaining reform agenda and a
detailed analysis comparing the IFMS with international best practices (Annex IILE),
recommendations would include:
>  Maintaining a commitment to a single and coherent concept offinancial management reform,
process reengineering and information technology as well as a strong and professional
national team. In this. connection, it will be important to: (i) continue with the vertical
expansion of the IFMS to the new subsystems-debt management, procurement, auditing,
human resources and public investment; (ii) improve and integrate in the IFMS peace
monitoring targets and policy benchmarks; (iii) integrate SEGEPLAN's GIS with the IFMS;
(iv) maintain strong oversight, training and ownership of system implementation, with close
collaboration between system managers to prevent discrete changes to regulations; (v)
continue training for managers and staff in public institutions, professional associations and
universities to strengthen domestic capacity to run the system; and (vi) disseminate results
and progress to key stakeholders (legislators, cabinet, press, civil society, donors, etc.) to
foster wide understanding and support for improved governance, decentralization and
improved service delivery.


25
Completing the legal framework to underpin IFMS, as well as complementary legislation that
can strengthen the impact of the reform program, including CGO, procurement and
administrative probity laws. While major progress has been achieved within the existing
legal framework, the sustainability of the new system should be embedded in the IFMS
Framework Law. Stronger CGO legislation should approve ex-post review procedures,
procurement legislation should constraint the often-abused "open contracts" rules to limit
exceptions, while the administrative probity law should codify and strengthen penalties
against civil servants involved in corruption.
>   Fully integrating external and domestic debt management needs. The recent decision to opt
for UNCTAD's SIGADE software system is appropriate since the software is fully
compatible with the IFMS information system, but domestic debt also needs its own new
system.
Developing an MTEF linked with IFMS and adopting the recently approved IMF Code of
Good Practices on Fiscal Transparency (Box H. 3).
>   Focusing on delivering early and tangible results as the IFMS expands horizontally to other
ministries, social funds and pilot municipalities. Being able to show cost reductions, reduced
reporting times and less burdensome processing steps can help to build support as financial
management is decentralized.
Reconsidering the agenda of pending horizontal institutional reforms.
Box 113 The 1IF Code on Fiscal Transparency
Because of its fiscal management expertise and universal membership, member countries decided to let the IMF
rake the lead in drafting a new code Mw greater fiscal transparency. An Inernm Committee was created in the
September 1997 Annual IMF/World Bank Meetings in Hong Kong, and the draft was finally adopted in the Annual
Meetings of September 1999. Fiscal transparency makes a major contribution to preserve stabilization efforts and
good governance. leading goverunnrts to be more accountable for the implementation of fiscal policy, and thus
helping them to strengthen their credibility and public understanding of macroeconomic policies and choices. The
Code is based around two objectives: (i) Information on government activities should be provided to the public,
budget preparaon, execution and reporting should be undertaken in an open manner and (ii) fiscal information
should be subject to independent assurances of integrity. Adopting the Code is consistent with the implementation
of a MTEF (Box 1.5). Its main operational guidelines are:
% Clarity ofRoles and Responsibilities. The government sector should be clearly distinguished from the rest of
the economy, and policy and management roles within government should be well defined; there should be a
lear legal and administrative framework for fiscal management.
* :06blic Availability of Information. The public should be provided with full information on the past, curent
and fiture fiscal activity of the government, and an annual statement should be published as an annex to the
annual budget giving a description of the nature and fiscal significance of contingent liabilities and other quasi-
fiscal activities (Box 1.4).
*   Open Budget Preparation, Execution and Reporting. The budget should specify fiscal policy objectives
under a consistent macroeconomic scenario, while identifying major fiscal risks, and procedures for the
execution and monitoing of approved expenditures. Fiscal reporting should be timely, comprehensive and
reliable, clearly explaining deviations from targets.
* Independent Assurances of litegrity. Public and qualified independent scrutiny should be developed by a
national body, probably appointed by Congress. with possible external advise. Such group kagency) would
have the responsibility to provide timely reports to the public on the fiscal performance and financial integrity
of accounts.
The Code acknowledges diversity wross countries in fiscal management sy stems and in cultural, constitutional and
legal environments, as well as differences across countries in the technical and administrative capacity to improve
transparency. Many countries may not be ready to implement the Code. but the IFMS has placed Guatemala with a
unique opportunity to adopt it


26
D.     The Missing Link of Public Sector Modernization: Civil Service Reform
2.12   Comprehensive civil service reform           Rgp" 11.5- Tills ofCG Bpwit
remains the critical missing link in the                      -i1w8
Government's public sector modernization
program, and it is a commitment under the
Accords. Reforms to date are having a major
impact on the efficiency of Guatemala's     .1
public sector, but they also have important  i
implications for the structure of the civil
service and will be difficult to sustain without
a more modern and flexible civil service                W 2o0 XM
regime.                                                         Posts
2.13   Public sector employment is affected by inadequate legal and institutional frameworks:
human resources management largely relies on ad hoc procedures, there is no single database for
public employment, the civil service law is outdated, salary levels are compressed, skewed
against higher-skilled categories and uncompetitive with the private sector.  In addition,
modernization is creating new demands for higher-skilled and better-trained staff. For instance,
sustainability of IFMS depends on attracting and retaining local staff with the appropriate skills,
especially given the planned departure of the international consultants supporting the project.
2.14   The Strategy. The Government initially adopted a comprehensive approach to civil
service reform, but was unable to implement it, relying instead on discrete and non-legal changes
to increase the efficiency and flexibility of the civil service. The Government's approach sought
to amend the civil service law and conduct a census of public employees. As horizontal reforms
progressed, it aimed to reduce redundant workers based on the elimination of overlapping
functions, decompress the salary and wage
Figure 1. 6 - Composition, of CG E    structure, reinforce controls on public sector
1995                    employment-hiring,           recruitment,
promotion and training- procedures, and
reduce ONSEC to a normative role, while
Others  Governance           creating  an  apolitical  Civil  Service
can.nnicaions 4%  [ 13%
crPublic Finance     Commission to oversee the implementation
riculture       (   3%
Education
52%          controversial and it could not mobilize
Composition of CG Employment      sufficient political support for its passage.
1998
2.15   Public Employment Trends. The
lack of reliable and centralized data
communic"tons Others               continues to prevent a full assessment of net
Agriculture  2%  Governance
2%       2%    17%pulcepomntrns(egyad
Health            Public Finance   Ochoa, 1999). The two sources of data are
14%                 2%            MIFIN for posts proposed in the budget, and
ONSEC     for   Congressionally-approved
ucathn budget posts, but both sources differ widely.
In 1998, DTP estimated a total of 146,220
employees, well below the total of 155,543


27
employees reported by ONSEC (Statistical Appendix, Table 32). These figures do not include
part-time and hourly workers, temporary 029 workers, gender decomposition, and positions in
decentralized institutions and state enterprises. ONSEC estimates are higher than those submitted
by DTP because not all budgeted posts are actually filled once they are approved, but residual
funds are used by ministries to hire employees under temporary 029 contracts. Also, staff
working on externally-financed projects are recorded ex-post under the new IFMS budget
reclassification norms.  ONSEC records also include staff participating in the voluntary
retirement programs, but who still remain on the payroll. Although there is no central record of
temporary 029 positions, a major gap in public employment data, there is no doubt they have
significantly increased under the present administration.
2.16   Despite data limitations and the lack of progress on the legal front, the Government was
able to rely on other mechanisms to restructure public employment in line with peace priorities
(Figures 11.5-6). Three ministries significantly reduced their staff-Transport, Agriculture and
Finance-but this was offset by increases in two ministries mandated by the Accords, Education
and Governance. Major reductions occurred in the Ministry of Transport-4,200 positions
representing a third of its 1995 labor force-as a result of contracting out road maintenance
services and the concessioning of the postal services. Agriculture cut its staff by about one half,
or 2,500 positions, as a result of adopting a normative rather than implementing role. MIFIN
eliminated two departments-Internal Revenue and Customs-but the net employment effect will
only be quantified once the voluntary retirement program is completed. Conversely, in line with
peace commitments, the Ministry of Education collapsed 48 internal units into 17, while
increasing its employment by 11,000 budgeted positions, mostly urgently-needed PRONADE
teachers. As a result it raised its share in total employment from 52 to 57 percent. Governance
increased budgeted positions by 7,000 due to creation of the National Civil Police.
2.17   Severance Payments. There is no reliable data on the financial impact of the retirement
programs, but the payroll has declined as a proportion of current expenditures, thus suggesting
improved efficiencies in the Government. In
December 1997, MIFIN estimated the overall   Figur 11.7- Compari of Eaffings forSelected Private
cost of voluntary retirements at US$48               mW PUblic SectorJobs 199
million (Statistical Annex, Table 33), but it
had no accounting of all employees separated  iener 
or of salaries and fringe benefits actually paid
to retired workers through the payroll.
Efficiency improvements are also claimed by  Machne              7
Authorities for the significant expansion in
services  delivered  reported  by  most   A      Mdwni 15e2
ministries, including those affected by labor                          a sedor
cuts, but they are hard to quantify except for  C
increases in coverage of education and health
(Table 111.1).                                    W   WM
Bemn 1847
2.18   Wage Trends. Although low salary
levels compared to the private sector continue      0  50    100    2=  250  MW
to prevent Ministries from attracting talented              Quetoles per nmth
and professional staff, limited decompression
of wages took place. Although the ratio of low-skilled (concierge) to high-skilled categories
(general manager) decreased from 0.13 to 0.11, such decompression might have been stronger
once bonuses and other fringe benefits are included. A closer public-private sector approximation
at the minimum categories appear more likely than at the maximum levels. Whereas in 1995, low


28
skilled wages in the public sector were as much as 100 percent higher than those in the private
sector, in 1998 they were only higher by 33 percent (Figure 11.7). In a more moderate shift,
private sector salaries for upper managerial categories ranged from 33 to 100 percent above those
in the public sector, not much different from the ratios observed in 1995 (Gregory and Ochoa,
1999). Two noticeable exceptions, however, are the SAT and the new national police. Whereas
the ratio of the highest to the lowest salary in the civil service structure is 14x1, at the SAT is
28xl; and the gaps are even greater at the top, as the SAT entry level for technical personnel is 3
times greater than the civil service maximum, not including performance bonuses for specific
activities equal up to 30 percent of salary. For its part, salaries for members of the new national
police doubled and benefit from a set of five new performance bonuses.
2.19   Distortions in the wage structure still prevail due to an outdated civil service law.
Although the Government has not submitted to Congress a new Civil Service Law, there are signs
of important changes in the labor market: (i) the number of public employees delivering essential
services has been reduced to a minimum with the privatization of state companies; (ii) the
estimated number of public employees adopting the voluntary retirement program is significant-
15,619 employees representing about 10 percent of the public labor force (Gregory and Ochoa,
1999); and (iii) labor mobility has significantly increased, as the increasing number of 029
contracts proves it. Management, however, continues to be constrained by the legal recourse to
emplazamientos, which effectively blocks the exercise of managerial prerogatives in personnel
management.
2.20   Recommendations: Civil service reform remains the Achilles heel of public sector
modernization, and is essential to sustain and consolidate the reforms made to date. Most
measures included in the Government's original strategy remain valid, but should also consider
additional elements:
>  An emergency decree to cancel vacancies once severance benefits for retired workers still on
the payroll are completed.
>  An urgent census ofpublic employees.
>  An amendment of the civil service law aimed to: (i) create a new civil service career path; (ii)
reform the public sector salary system through a competitive wage structure and norms
promoting labor flexibility; (iii) redefine the role of unions; and (iv) redefineemplazamiento
procedures for dispute settlement, limiting appeals to the Labor Courts.
>  A new civil service career which would need to: (i) create a human resources system at the
IFMS to develop a centralized census of all public employees, their salaries, benefits and
severance payments; (ii) transform the actual Junta Nacional del Servicio Civil into an
apolitical Civil Service Commission whose term should go beyond the electoral cycle, with
its main role to be the final arbiter of personnel disputes; (iii) set new standard job
descriptions/staffing needs per ministry, new procedures for hiring, recruitment, promotion
and training, and performance benchmarks for each position; and (iv) reconsider ONSEC's
functions from an operational to a normative role.
>  Reform the salary and benefit system. The new salary system should not attempt to define a
single salary structure, but rather decentralize its definition per ministry/institution, at least
for professional and technical categories. It should also monetize most benefits, set limits to
contracting under category 029 so as to prevent abuses and, in support of the decentralization
process, design bonuses and fringe benefits to induce professional personnel to accept
assignments outside Guatemala City.
> Assess the fiscal impact of comprehensive civil service reform, including the new salary and
benefits structure, training needs and severance payments. Such study should also cover
autonomous and decentralized state entities.


29
E.     Decentralization through Deconcentration and Municipalization
2.21   Implementation of the Peace Accords requires improved coverage of basic social services
and infrastructure, especially toward isolated rural areas. Decentralization was seen as a natural
way to expand coverage, improve targeting and reduce the expenditure bias toward large urban
areas, especially the capital. Although the Government has not articulated a comprehensive and
coherent longer-term decentralization strategy, its decentralization efforts have focussed on
deconcentration of selected public sector functions and a strengthening of the financial autonomy
of municipalities. The Government has made only limited progress in deconcentration but
substantial progress in transferring resources to the municipal level.
2.22   Although there has been some progress in deconcentrating government functions from
Guatemala City toward a few pilot ministerial units, which was required by implementation of the
IFMS, these efforts have been modest and still preserve the hierarchical relationship between the
Central Government and units in the field. These efforts included: (i) requirements under the
IFMS to create IFMSITOS (small, administratively decentralized ministerial pilot units); (ii)
partial internal deconcentration in the Ministries of Education, Health and Agriculture; (iii)
formal decentralization of ministerial functions to decentralized line programs, such as education
to PRONADE (Box 111.1) and rural health services to IAHS (Box 111.2); (iv) formal transfer of
public investment execution to social funds, e.g., school building by the MOE to the FIS and
FONAPAZ, and water and sewerage projects to municipalities/INFOM by the MOH; and (v)
partial transfer of rural roads rehabilitation and maintenance to selected municipalities in the
department of San Marcos, as part of a pilot World Bank-supported project.
2.23   There has been considerable progress in strengthening the. financial autonomy of
municipalities. Municipal elections were reestablished in Guatemala soon after the transition
from military to civilian rule in 1985. The 1985 Constitution established a transfer of 8 percent of
Central Government current revenues to municipalities. Up to 1995, Governments had not
complied with the full transfer and amounts transferred suffered frequent delays. Transfers to
municipalities were strengthened during peace negotiations in 1995, when a 1 percentage point of
the value added tax (VAT) was earmarked for municipalities. Since 1996, other measures have
been taken to strengthen municipal finances, including: (i) helped by the IFMS, compliance with
the timely transfer of 10 percent of general revenues to municipalities, a higher level than in any
Central American country; (ii) creation of ad-hoc committees in the regional Development
Councils (DCs) with an active participation of municipalities; (iii) supported by a World
Bank/UNDP program, a gradual increase in the number of municipalities that are now able to
administer their own financial resources, from 10 in 1995 to 52 in 1999, tripling the resources
they had received in the past three years (Rojas, 1999); and (iv) successful development of pilot
models of financial cooperation between DCs, social funds, municipalities and local
communities. By law, 80 percent of the constitutional transfer and 90 percent of the VAT
transfer must be allocated by the municipalities to investment in social and basic infrastructure
(Rojas, 1999). Municipal governments have not increased their own locally collected resources
significantly, relying almost exclusively on the Central Government transfers.
2.24   While there has been important progress in the decentralization approach adopted by the
Government, a number of important obstacles to further and effective decentralization remain:
L Ministries and social funds, including those that are taking steps to deconcentrate some of
their functions, still face considerable resistance to change. As a result, deconcentrated units
have limited political and financial decision-making power. In the case of FONAPAZ, the
fund has created deconcentrated executing units in Huehuetenango (DECOPAZ) and San


30
Marcos (under the Local Development Program), but their impact remains constrained by the
lack of effective delegation of decision-making powers and limited autonomy (World Bank,
1997b).
u  The SEA Accord calls for a new legal framework through a reformed Municipal Code, in
order to strengthen and clarify the functional role of municipalities. The revised Code should
also strengthen the accountability of municipalities, since unlike the social funds which are
scheduled to adopt IFMS accounting procedures in 2000, municipalities are treated under the
present legislation as autonomous entities required to submit their budget to MIFIN for
information purposes only, thus exempting them from full public accountability.
u  The Central Government does not require nor collects budget execution data for
municipalities (nor for the social funds). There is therefore no way to assess the extent to
which municipalities are complying with the requirement to devote 80-90 percent of Central
Government transfers to investment needs or the sectoral allocation of their spending.
o  Only three social funds-FIS, FONAPAZ and FOGUAVI-are subject to partial audits by
the Comptroller General's Office.
u  With a few exceptions, DCs remain largely underdeveloped and lack autonomy from the
Central Government. The legal framework for DCs is unclear, especially in terms of their
functional autonomy and integration with municipal governments. The SEA Accord also
calls for a revised legal framework for DCs.
u  Guatemala maintains a long list of excises inherited from colonial times. The INFOM form
for the collection of municipal revenues includes more than 150 different excises and more
than 80 non-tax revenues, most of them negligible in terms of revenue raised, and with
relatively significant reporting and administrative processing costs.
u  There is some evidence that a few larger municipalities are turning to commercial credit lines
that have an implicit state guarantee, raising income above central government transfers and
their own revenue sources. These municipalities appear to be using the revenue transfers
from the Central Government as collateral for commercial debt. For instance, Mixco, with a
debt service/revenue ratio of 17 percent and INFOM transfers of Q140 million, has put
together a commercial credit package of Ql00 million (Rojas, 1999). Although the amount
of sovereign debt guarantee to municipalities is not high at 0.3 percent of GDP nationally in
1998 (Funes 1999), if not controlled this practice may eventually undermine municipal fiscal
discipline and create a potentially large implicit contingent liability for the Central
Government (Box 1.4).
2.25   Recommendations: Municipalities will continue to play a key role in Government
efforts to expand service coverage and meet the needs of local communities. There is a need,
however, to clarify and rationalize the role of municipalities in implementation of peace programs
and their links with community-based programs, especially as many of these programs are donor-
funded and at some point will need to be absorbed locally. The new Administration should
consider articulating a longer-term and comprehensive decentralization strategy which, in
addition to further ministerial de-concentration and decentralization of service delivery schemes
such as PRONADE and IAHS (Boxes 111.1-2), should consider inter alia:
>  Development of a new matrix of inter-government collaborative transfers. As already being
successfully piloted by the social funds, the Central Government should channel external
resources to social and basic infrastructure investments and, for their part, municipalities and
local community programs should provide not only matching resources (already recognized
by multilateral institutions as counterpart funds to their loans), but define their role in areas
they could realistically take over from the Central Government--e.g., maintenance and
upgrading of rural roads-and the sustainability of projects. The pilot local development and
rural roads programs in San Marcos and Huehuetenango are examples of efforts geared


31
toward a new decentralized model of collaboration between the Central Government,
FONAPAZ, DCs, INFOM, municipalities and local communities.
>  Approval of a new Municipal Code and legal framework for DCs, required by the Peace
Accords. This should include the need for financial discipline as a guiding management
principle and municipal compliance with essentially the same accounting principles and rules
that apply to the Central Government.
>  Intensive training to build institutional administrative capacity at the municipal level in line
with extension of the IFMS to the municipal level. The reforms should aim to ensure that by
the end of the next Administration, two-thirds of municipalities are effectively managing and
auditing-internally and externally-their own resources.
>  Full and prompt integration of the social funds to the IFMS and amendment of the legal
framework required to allow the auditing of their domestically-financed budget by the
Comptroller General's Office.
>   The replacement of the presently complex system of municipal excise taxes by a simple
structure that only retains the most revenue-significant taxes.
>  Regulation of the conditions under which municipalities can have access to, and rely on state
guarantees for borrowing from domestic commercial sources or external sources.
F.     The Need for Improved Governance
2.26   International experience clearly shows the importance of good governance for effective
development generally, and particularly for efficient public service provision. Recent empirical
evidence finds a strong causal relationship between good governance and better development
outcomes (Kaufman, Kraay and Zoido-Lobat6n, 1999). Governance can be broadly defined as
the traditions and institutions by which authority in a country is exercised. This includes: (i) the
process by which governments are selected, monitored and replaced; (ii) the capacity of the
government to effectively formulate and implement sound policies; and (iii) the respect of
citizens and the state for the institutions that govern economic and social interactions among
them. Given such a broad definition, measuring governance in quantitative terms requires
measuring subjective perceptions through surveys drawn from international risk-rating agencies
and national residents. Although, as discussed throughout this report, many of the Government's
recent public sector reforms are contributing to improved governance, international rankings still
indicate that corruption (or the failure of governance) is a serious problem in Guatemala. It
should be noted, however, that the most recent indices and rankings of the quality of governance
do not reflect the recent reform effort. Although perceptions are slow to change, they nonetheless
constitute a good measuring device to assess the impact of reforms.
2.27   Although there are no comprehensive diagnostic studies or reliable data on which to base
a serious analysis of governance in Guatemala, international experience and conditions in
Guatemala suggest that a future governance agenda should focus on four clusters of governance
issues to guide the reform effort (Johnson, Kauffmann and Zoido-Lobat6n, 1999):'
a  Regulatory burden, or the set of variables measuring the impact of regulations, e.g., the tax
burden, or the credibility of the government's policies on business development;
o   Governance effectiveness, or the combined perception of the quality of public service
provision, e.g., the quality of bureaucracy;
Two other possible clusters are: (i) voice and accountability, or the set of indicators measuring various aspects of the
political process, civil liberties and political rights; and (ii) political instability and violence, or the combined
perceptions on the likelihood of political destabilization by unconstitutional and/or violent means (Kauffmann, Kraay
and Zoido-Lobat6n, 1999).


32
Li Corruption or the exercise of public power for private gain, also a symptom of the failure of
governance; and
u  Rule of law, or the indicators that measure the extent to which agents have confidence in and
abide by the rules of society and include perceptions on the incidence of crime, the
effectiveness and predictability of the judiciary and the enforceability of contracts.
2.28   Guatemala's weak judicial system has been detrimental to the rule of law. About half of
the population does not have access to the judicial system. The system is cumbersome and
inefficient. There are insufficient judges, rural lawyers, no justice centers in more than one-
fourth of municipalities and no clear role assigned to the traditional (indigenous) dispute
resolution mechanisms in the formal system. According to a recent survey, 88 percent of the
population does not have confidence in the judicial system, perceiving it as inefficient,
inadequate, corrupt and poorly managed (World Bank, 1999). Recent empirical research shows a
positive relationship between the rule of law and government revenues, as well as an inverse
relationship between the rule of law and the size of the unofficial economy. Guatemala appears
among countries with the poorest rule of law, lowest Government revenues and highest unofficial
economy (Johnson, Kauffman and Zoido-Lobat6n, 1999).
2.29   The Government assigned high priority to strengthening the judicial system, seeing it as a
key element of the peace process and the country's longer-term development agenda. With the
support of the World Bank and other donors, it has been implementing a comprehensive judicial
reform program, including: (i) strengthening the institutional capacity of the Judicial Branch; (ii)
supporting the fight against corruption among staff in the judicial system; and (iii) strengthening
access to justice through expanded infrastructure and access to the judicial system by indigenous
populations.
2.30   Recommendations. Improved governance should be an important second-generation
reform, both to improve Guatemala's development prospects but also as an essential complement
to the public sector reforms underway. Defining and implementing a governance agenda is
necessarily a complex and longer-term effort, which must be adapted to each country's
circumstances and political reality. Many of the public sector reforms underway or planned
should be integral parts of a governance agenda, including extension of the IFMS, an effective
and autonomous SAT, improved accountability by the social funds and municipalities, civil
service reform to create a professional and accountable public sector, and the judicial reform
program. Other elements that could be considered include a major effort to deregulate the
economy, increased transparency in the remaining privatization process and an improved
regulation of already privatized activities, strengthening the autonomy, control and accountability
of institutions such as the Comptroller General's Office, development and enforcement of codes
of conduct for public officials, targeting of specific areas or agencies where corruption
perceptions are high,2 greater involvement of civil society in the monitoring of public sector
activities and the development of a national integrity plan.
A Bank survey of non-traditional exporters pointed to inefficiencies and corruption in customs as a major constraint
on private sector activity (World Bank, 1996a).


CHAPTER III
MONITORING FISCAL REFORM: A REVIEW OF PEACE TARGETS
A.     The Rationale for Peace Benchmarks
3.1    Background. Guatemala's Peace Accords are unique in that they attempt to engineer a
fundamental shift in the country's development agenda, reversing a long-standing pattern of low
social investments and exclusion. To do this, the Accords include a set of social and economic
targets, which although relatively simple, require a major and sustained shift in public
expenditure patterns. Most of targets are in the SEA Accord and the remaining ones are part of
the Strengthening of Civilian Rule (SCR) Accord (Box 1.1). Other Accords, such as the one on
Indigenous Rights and Identity also feature cultural and gender commitments, but have no or
negligible links with expenditure patterns or allocations. As argued in the previous two chapters,
the Government has made important progress in public sector modernization and expenditure
reform, which was considered vital for peace implementation. This chapter reviews progress in
meeting key social and economic targets of the Accords. The Accords divide targets into fiscal
and social. Fiscal targets, known as quantitative targets, also involve intermediate non-mandatory
performance indicators, which are designed to keep track of gradual progress toward individual
targets. They are intended to alert Authorities about possible deviations, allow them to take
corrective actions and, in the case of significant lags, serve as a basis to reschedule/reprogram the
original targets. Social targets, known as qualitative targets, refer to output or outcome-oriented
targets.
3.2    Main Features. The set of agreed targets places similar emphasis on fiscal inputs
(spending levels) as on social outcomes and outputs (e.g., literacy rates, gross coverage of
primary education). The need to target increased spending stems from Guatemala's chronic
under-investment in social and basic infrastructure, crowded-out by high military spending during
the conflict years, and leading to the exclusion from the development process of large segments
of the population, especially poor and isolated rural areas, and indigenous communities and
women.
u  The SEA targets a 6 percent growth rate. Bank studies show that the minimum growth rate
needed to reduce the number of poor in Guatemala is 5.8 percent, slightly below the peace
target, but well above average growth of 4 percent during pre-peace years (World Bank,
1995). The country's poverty reduction potential depends on the responsiveness of poverty
to changes in mean incomes, i.e., the growth elasticity of poverty. Such elasticity, however,
is inversely related to income inequality-countries such as Guatemala with high income
inequality have a lower growth/poverty elasticity and typically require higher growth rates to
offset growth losses arising from unequal income redistribution effects. Guatemala has the
second most unequal distribution of income among 150 developing countries (World Bank,
1997a), and its growth/poverty elasticity (-1) is the lowest in LAC.
o  In 1995, Guatemala had the second lowest rate of public investment as a share of total
investment among LAC countries-11 percent (Burki and Perry, 1997) and the lowest share
of Central Government expenditure in Central America-9.4 percent of GDP (World Bank,
1997b). As a result, the Peace Accords assigned high priority to increasing public
investment.
o  Among 7 social outcomes and outputs, six of them refer to literacy and coverage of primary
education, infant/maternal mortality and polio/measles rates, whose potential gains would
greatly affect the target populations (Table 111.1). In 1995, overall adult illiteracy was 35.8
percent, but reached 72 percent among indigenous people and 53 percent among women;
gross coverage of three years of primary education averaged 84 percent of the school age


34
Table 111.1 Performance of Peace Monitoring Indicators
Fiscal (% of GDP)                       Base 95                 1997      1998      1999        2000
1. Growth Rate (%)                              Target          4.2      5.1        6.0         6.0
Actual          4.3      5.1 P
2. Tax Ratio                              7.6   Target          8.6     10.0        11.4       12.0
Actual          8.8
3. Health Spending                        0.9   Target           1.0      1.1        1.2        1.3
Actual          1.0      1.1        1.2         1.3
4. Education Spending                     1.6   Target           1.9      2.1       2.3         2.5
Actual                   2.2P
5. Public Security Spending               0.3   Target          0.3       0.4       0.4         0.5
Actual          0.3      0.5        0.6         0.6
6. Judicial/Public Ministry Spending      0.3   Target          0.3       0.4        0.4        0.5
Actual          0.3      0.4                    0.5
7. Military Spending                       1    Target          0.9       0.8        0.7        0.7
Actual          0.9      0.7 P      0.6         0.6
8. Preventive Care                        38    Target            -        -      >50.0       >50.0
(% of health budget)                      Actual         43.0     46.0 P                52.0
9. Low Income Housing Budget               -    Target            -       1.5        1.5        1.5
(% of tax revenues)                       Actual            -      1.5 a      1.6 f       1.5
10. Investment on Rural Development         -    Target         50.0     50.0       50.0        50.0
(Million of Q)                            Actual            -    265.9 e    329.3 a   >300.0
11. Investment on Rural Infrastructure      -    Target        300.0    300.0      300.0       300.0
(Million of Q.)                           Actual            -   >300.0 e   >300.0 a   >300.0
Social/Security                         Base 95                 1997      1998       1999       2000
12. Literacy rate (%)                     64.2   Target            -        -          -        70.0
(INE -- 1994 Census)                     Actual         66.4 e   67.4 e     68.6       t
13. Primary Education Coverage             84    Target            -        -       100.0      100.0
(three years - gross rate)               Actual         86.0 e     89 e         f           f
14. Primary Education Coverage             69    Target            -        -       100.0      100.0
(three years - net rate)                 Actual         71.0     72.9 e                      C
15. Infant Mortality Rate                 39.9   Target            -        -       20.0        20.0
(deaths per 1000 living births)          Actual         38.5 e   37.0           f           f
16. Maternal Mortality Rate                97    Target            -        -       48.5        48.5
(deaths/1 00,000 women giving birth)         Actual         97.9 e   97.7 e         e
17. Poliomyelitis Cases                    80    Target         85.0     85.0       85.0        85.0
(vaccination coverage)                   Actual         7        88.0 e     88.0 f      88.0
18. Measles Cases                          83    Target            -        -          -        95.0
(vaccination coverage)                   Actual         74.0 e   79.0       84.0 f
19 Army Reduction                        46,900  Target     31,423.0   31,423     31,423     31,423
(number of troops)                       Actual     31,270.0        -          -           -
20 Military Police                       2,421   Target          Nil      Nil        Nil        Nil
(number ofmembers)                       Actual          Nil      Nil        Nil         Nil
a. Assigned; e. World Bank staff estimate; f. World Bank staff forecasts PlB99: Q134,301.7 million
Sources : MIFIN, MINUGUA, Anderson (1999), Chinchilla (1998), Acela (1998), Barillas and Valladares (1999)
Note: Preventive health includes water & sanitation. Shading means under achievement.


35
population, but indigenous males averaged only 1.8 years of schooling and females 0.9
years; infant mortality was 39.9 per 1,000 live-births, but reached over 55 in the poorest
rural areas; and polio was eradicated in LAC in the early 1990s, but measles was still
responsible for over 10 percent of deaths of poor children below 5 years old in the
developing world (PAHO, 1998). Since both illnesses were responsible for infant deaths
among poor children in developing countries in the 1980s, their inclusion in the Accords
appears to respond more to a worldwide commitment to their full eradication, rather than
to specific conditions in Guatemala. These social priorities are appropriate, but the
targets are relatively modest by international standards (para. 3.3). Thus, in a number of
instances specific targets are complemented by additional peace commitments. For
instance, although peace spending is expected to benefit women, there has also been an
effort to strengthen women's rights through the creation of a participatory body to
improve the role of women, the Women's Forum (Foro de la Mujer) in 1997 and the
Legal Defense Agency for Indigenous Women (Defensoria de la Mujer Indigena) in
1999. A similar case applies to indigenous peoples, where the Indigenous Rights Accord
complements the efforts of the SEA Accord to improve development in indigenous
communities.
3.3    International standards. Guatemala's peace targets may appear ambitious in national
terms, but their gap with respect to international standards is significant, reflecting Guatemala's
low social base and the modest revenue effort agreed in the Accords. For instance, in 1996:
a  the average tax revenue ratio in Latin America was close to 14 percent when the Accords
were signed, but Guatemala's target of 12 percent would only be reached more than half a
decade later;
u  average LAC public spending on health was 3.0 percent of GDP (World Bank, 1997),
whereas the 2000 peace targets is only 1.3 percent of GDP;
o  LAC countries spent an average 4.3 percent of GDP on education (Burki and Perry, 1997),
whereas the peace target would require reaching only half of this figure;
a  the illiteracy target of 30 percent appears a decade behind a LAC average under 20 percent
(UNDP, 1998);
u  maternal mortality rates in LAC averaged 31 per 100,000 in the mid-1990s (PAHO, 1998b);
the Accords would require Guatemala to halve the 1995 maternal mortality rate, but even
then it would still be 48.5 per 100,000; and
a  Guatemala's infant mortality rate would be halved over five years to reach 20 percent, in line
with the LAC average (22 per 1,000 live-births), but recent trends in a group of LAC
countries with high mortality rates show that it took no less than 15 years to halve infant
mortality rates (PAHO 1998b).
B.     Overview of Progress
3.4    Overall performance in implementing peace targets has been mixed. In terms of
quantitative inputs, with the exception of the tax ratio, fiscal measures adopted by the
Government have ensured timely compliance with most spending targets, with minor deviations.
In terms of social outcomes and outputs, however, performance has been less than satisfactory.
Significant deviations from the original targets suggest the need to consider their rescheduling or,
due to data limitations, their eventual reprogramming.
3.5    Fiscal inputs.  Fulfillment of most public spending commitments reflects the
Government's extraordinary effort to shift resources, partly resulting from lower military
spending, toward social and basic infrastructure sectors. These increased spending levels,


36
however, will become unsustainable over the medium term unless tax revenues rise in line with
peace commitments (para. 1.19). Until 1998, the degree of progress was as follows (Table 111.1):
u   Most targets in education, health, justice, military and public security, low-income housing,
rural development and infrastructure expenditure were met. Spending on education, justice
and preventive care are projected to be slightly below their 1999 target.
o   Four targets-military, public security, rural development and infrastructure-featured over-
compliance. In the case of rural investment, the Accords required a relatively modest
amount, less than 0.3 percent of GDP.
o   Growth was on track to reach 6 percent in 1998, but the economy lost dynamism in the
second semester due to the threat of global recession, lower commodity prices, the impact of
Mitch (especially in banana production), a severe credit crunch following lax monetary and
fiscal policies, and difficulties in the domestic financial/exchange system. Liquidity and
solvency problems in the financial system have led to a tightening of credit availability, as
banks have protected themselves from bad loans. As a result, Authorities project growth of
3.6 percent in 1999, well below the peace target of 6 percent.
o   Compliance with the tax-ratio target of 12 percent of GDP remains unsatisfactory and its
recent rescheduling to 2002 might prove insufficient. The deviation from its intermediate
target in 1998 was about 1 percent of GDP and, in the absence of any further tax policy
measures, the gap is projected to reach above 2 percent of GDP in 1999. Meeting this target
is essential to sustain peace investments (para. 1.19). The Comisi6n de Acompaiamiento
agreed to reschedule it to 2002 and to convene a National Fiscal Pact that would attempt to
reach consensus on the fiscal measures needed.
3.6    Recommendations:     The Peace Accords place considerable emphasis on meeting
expenditure targets. While this is appropriate given Guatemala's history of low social spending,
these targets would need to be complemented by qualitative goals and deeper reforms that can
make these gains sustainable. For example:
>  Survey data are needed to verify whether higher social and basic infrastructure spending
allocations are indeed contributing to improved living standards among target beneficiaries:
rural, poor, indigenous and female (including girls) populations.
>  Maintaining the budgetary shift toward a capital/current ratio spending of 0.55, with the
exception of education, is as important as increasing overall spending levels in line with
peace priority targets needs. Otherwise, meeting the Government's share of sector spending
could be explained by additional recurrent costs, such as salary increases.
> Better data and integration with the Government's financial management system are required
to assess the impact of social fund expenditures. At present, official data only register as
sector executed spending the amount of resources transferred from the Central Government to
a specific social fund, but there is no information on the composition of executed spending by
the funds (Chocano, 1999a), nor on their impact by type of beneficiaries. In 1997, transfers
to social funds represented around 30 percent of public investment (para. 1.8), but due to
inadequate data, compliance with targets can only be estimated indirectly through proxies.
>  Actual spending by municipalities should also be recorded by sector and integrated within
the IFMS. In 1997, the Constitutional transfer to municipalities represented 25 percent of
public investment (para. 1.8). By law, 90 percent of earmarked revenues must be devoted to
non-recurrent expenses, but there is inadequate information to assess compliance, how these
resources are spent and their social or gender impact (para. 2.24).
As the Ministry of Education has transferred the responsibility for classroom construction to the social funds and a
large share of their investment has been devoted to school rehabilitation/construction, municipalities might conceivably
share responsibility with local parent-teacher associations and NGOs in the future, leaving the Central Government to
share the cost of counterpart funding for donor-financed projects, with the social funds gradually shifting their
resources to a wider set of basic needs.


37
>   A better geographic desegregation of sector spending is needed to ensure that resources are
targeted to rural areas and where the poorest/indigenous populations live. Despite some
improvements, budget allocations are still significantly biased toward Guatemala City and
non-poor departments (Tables 1.2-3).
>   Private contribution to local development projects should also be registered. Some funds
(e.g., FIS) have only recently started to consider private contributions as counterpart funding.
>   The IFMS budget reclassification needs to be amended to enable an adequate monitoring not
only of peace, but also expenditure-reform targets. The 1997 IFMS budget reclassification
disrupted fiscal time-series and makes peace monitoring an extremely hard and time-intensive
task. In the interim, significant statistical discrepancies remain (Box 111.3).
3.7     Social indicators.  Performance has
improved, but only moderately in terms of            Box 11L! The PRONADE System
social outcomes and outputs. In most cases,   PRONADE (Prrm      Vacwnal de Autogestrn
deviations from targets (represented by shaded  Uucatva)  is  a  community-managed  and
areas in Table 111.1) are significant and require  de=enalized program hw aims to increase primary
their rescheduling or, due to data limitations,  education coverage in naal areas, in line with peace
their elimination or substitution by alternative  comnitments. In less than three years, PRONADE
indicatorshas 181 COEDCAS (Education Committees of
indcatrs par. 39).parents, created by Instatuciones de Senuicios
O   Literacy rate. The CONALFA literacy       Edwx&os-lSEs) and 3,771 teachers working %ith
program has led to an increase in literacy  132,985 primary students in 19 departments  The
from 64.2 percent in 1995 to 67.4 percent  p      focuses on 4 priority deparments Alu
in 1998 (Anderson, 1999). Illiteracy rates  Verite cuesidenago. an    rms o lQuc
in indigenous populations, however, are 45  desertion rae and higber teacher attendance, and
percent higher than in non-indigenous, and  increased involvement by parens expansion of
32 percent higher among women than in     PRONADE is facing challenges (CIENTREAL.
men (UNDP, 1998, 1999). Despite this       1999c):           nt
-2  Mor teachersarneddThswctahr
initial  success,  the  program   faces       maio of 49 in rural schools is too high, requiring a
increasing difficulties in meeting peace      Large number of multi-grade schools;
targets due to: (i) geographic dispersion,  C  PRONADE   inf     ttrlr needs  to  be
ethnic and gender diversity, which makes it   stgthened-half of the schools are in bad
increasingly  harder  to  identify  and    0  Administranve procedur for mAing paNmenu
motivate the rural (mostly Mayan and          toCOEDUCAS are cumbersome and lcngth5:
women) illiterate population to register in  %1 Ile division of labor between ISEs and
the program; (ii) a low 37 percent approval   COEDUCAS is not clear and
or promotion rate from pre- to post-literatePRONADE
or pomoion atefro  preto  ost-iteate teachers are lower than for teachers Ln traditional
stage (Ral6n, 1999-a frequent problem
among adult programs worldwide; and (iii)
low availability of bilingual schools (literacy and school attendance are positively correlated)
which can attract illiterate indigenous adults-there were 1,367 bilingual schools in 1995 (12
percent of total schools), growing by about 100 schools per year; and 9 out of 23 Mayan
languages have no bilingual school (Comisi6n Paritaria, 1998).
c Primary education coverage. The target of 100 percent gross coverage of 3 years of
primary education by 1999 requires rescheduling. It increased from about 84 percent in 1996
to 89 percent in 1998, i.e., an annual increase of 2.5 percent but below the 4 percent effort
required to meet the peace target. The innovative PRONADE program (Box 111.2), covered
75,603 new rural and poor (mostly Mayan) students in 1998 (Statistical Annex, Table 36).
The female/male ratio, however, showed a slight improvement among indigenous and rural
women between 1996 and 1998 (UJNDP, 1999). Meeting the peace target would require a
formidable effort not just in terms of expanding school infrastructure, but also in terms of the
quality of the primary education provided: (i) the dropout rate in primary schools is


38
extremely high (7.7 percent in 1999), which almost fully erodes annual progress on this
indicator; (ii) repetition rates in primary school are also very high (7.9 percent in 1999), and
represents an annual cost for the state of US$13.2 million; (iii) the average number of 7-12
year old rural students per teacher (49) is high by international standards (40), which
contributes to the high dropout and repetition rates (Statistical Appendix, Table 41); (iv)
coverage and average school years attained are still extremely low in five out of six
departments with high density of indigenous rural populations: Totonicapin, Sololi, Alta
Verapaz, Quich6 and Huehuetenango (Statistical Appendix, Table 39); and (v) low coverage
remains critical among rural girls (Chesterfield and Rubio, 1998).
o  Infant mortality rate. INE data show
that infant mortality is decreasing, but not       B   M.2 The LAW
enough to meet the target. From 39.9       L     k i a    p O   eufted progra
deaths per 1000 living births in 1995, it  -  -       by. Miy of Hkabb wkb local
decreased to 37 in 1998 and should reach  organk -  to vViad coverag  of rosty
33.5 by 2000, well short of the target of  VCewuWfR.  w*u amou na aram in Ime
20.    Infant mortality  is  positively  wieaO                      "c:
correlated with ethnicity and rural poverty  bae bf     wit       l    _. 005,
(Barillas and Valladares, 1999). The main  si*Og                  oftdo pakap is
causes of infant deaths remain respiratory  US$6, lw d  hf.-Ie l      ove    of
problems,  diarrhea,  heart  problems,  US$12-13. Aftw        2:.Yeam ft 1AHS is
11igj  2 106f1ties in8'wt h
premature birth and chronic malnutrition.                     401MM.Ws, whth
Malnutrition  also  has   a   positive  D                                for new
correlation with school dropout, 0.66   hcd&   i  a     Ibe         i number of
(UNDP, 1998). Nine departments account  prr(Qwll 1098):
for about 60 percent of infant deaths: San  the progra  nedo              as it
Marcos, Quetzaltenango, Huehuetenango,           t d        o volunry    wie
Quich6, Escuintla, Totonicapdn, Alta       mediun-t;
Verapaz,      Chimaltenango,      and   0  t Wvd of wAcudon aW number of partiipant
Suchitepequez  (Figure  111.1)  Infant     NUOs is Kmft4
mortality is positively correlated with           w        to  liit toIy wih
higher public spending, but only if
services  are   well   delivered  and   *  ripplaeat       to NGOs we lecgty (3
managed -especially through enhanced       monmix and          and
local  capacity  and  participation  in    based. i'     6d Ananlal rd  thn os
preventive health-and combined with the    in-ft veriiction
expansion of water and sewerage
programs which reduce the incidence of diseases (Abo and Reinikka, 1998). Although
preventive health spending is budgeted to be close to 50 percent in 1999, the success of the
Integrated Attention to the Health System (IAHS) is far more relevant (Box 111.2.).
o  Maternal mortality rate. Data on maternal mortality is unreliable and contradictory (the
next national health survey is scheduled for 1999-00). INE reports 97 deaths per 100,000
living-births for 1995, whereas the National Maternal-Child Health Survey estimated an
average of 190 deaths for 1990-95, and the National Maternal-Child Health program
estimated it at 163 deaths during 1991-97. Under-reporting is clearly a reason for such a
wide dispersion in estimates. Maternal mortality is also highly concentrated: 9 departments
account for 74 percent of reported maternal deaths (Figure 111.2).
o  Poliomyelitis and measles cases. No polio and only a few isolated measles cases have been
reported in Guatemala since 1995, but international certification is still pending. Given data
under-reporting, it will depend on an indirect indicator: immunization coverage. Polio and
measles coverage were 88 percent and 79 percent respectively in 1998; whereas international
certification requires a minimum coverage of 85 and 95 percent (Barillas and Rosales, 1999).


Figure 1111:
Infant Mortality by Department, 1996
100%
9/0%
60%
50%
30%                           me Departments account for
more than half (t61%) olflhc
20%                         infant casuatie
10% -
0%
Figure 1112:
Maternal Mortality by Department, 1996
100%
50%
ine Dprments acutfor
309%                        threc fourths (74%) ofthe___                       ____
20%
10%
0J
e20%
zo%
49                          4
CY,         f          "~


40
J Army reduction and disbanding of the military police. The Government exceeded the
target for reducing the armed forces by 33 percent. The number of troops on active duty fell
from 46,900 in 1996 to 31,270 in early 1998. In addition, demobilization of the military
police was carried out in two phases: 699 members on March 1997 and 1722 members on
December 1997. Progress in this area allowed a decrease in military spending (0.4 percent of
G 1) P).
3.8    Recommendations. Although social indicators have improved gradually, there is still a
lon way to go in meeting specific peace targets by the specified dates. Although targets will
need to be rescheduled, there is no escaping the fact that without a considerable increase in
allocations to the social sectors, even the rescheduled targets will be difficult to meet. In
addition, (overnment efforts should focus on:
Expanding PRONADE and the IAHS is a necessary, but not sufficient condition to reach
coverage targets. Improving the quality, ethnic and gender focus of education, e.g., reducing
dropout and repetition rates, or increasing enrollment rates among indigenous and girls,
should he given as much priority as raising the volume of education resources. This also
implies increasing the number of rural schools in indigenous areas faster than in urban areas
(Chesterfield and Rubio, 1998), as well as a stronger effort by MOE in areas that affect
quality, e.g., teaching materials, textbooks, school supervision.
CON4ALFA should change its approach to post-adult literacy, placing greater emphasis on
increasing its present promotion rate, and with an increased focus on indigenous women.
Lessons from Indonesia's best practice could be helpful.
o  Given the high concentration of low education coverage/illiteracy and infantnalernal
mortalit in afew departments, applying a well targeted approach is essential, both by using
the GIS, as well as baseline surveys under an LSMS exercise (para. 3.12). Ex-ante targeting
by PRONADE and IAHS using these instruments can greatly improve their effectiveness.
C.     Rescheduling Peace Targets: Some Considerations
3 9    Although Guatemala has made
important progress toward the fulfillment    13
of peace targets, there are some important
gaps that will require a reassessment of     1i
indicators  by   the   Comisi6n   de          10
Aconpahaniento. These include:
> Tax ratio. Given recent performance,
even reaching the 12 tax ratio target
by 2002 looks difficult to attain. In        if 19 19 19 1 ai _ni am
net terms, the tax ratio is projected to  T  79 a7 a8 10 114 12 12 12
increase to 9.4 percent by 1999, or 2.6  P    7.9 a7 18 a9 9.4 11 11.5 12
percent of GDP below the target now
rescheduled for 2002 (Figure 111.3).
Moreover, a passive scenario suggests that this gap would increase to about 3 percent by
2000 it no additional measures are taken (Table 1.5). While raising an additional 2.6 percent
of GDP in tax revenues over a three year period does not appear as an unrealistic target,
Guatemala's fiscal history over the past couple of decades strongly suggests that unless most
of this revenue effort is undertaken early on in the term of the incoming Administration, it is
unlikely to occur. In other words, given Guatemala's political economy realities, a gradual
approach to expanding the tax base is unlikely to succeed. Measures that would need to be
considered include: (i) an unavoidable VAT rate increase toward Central American levels


41
(13 percent), which would yield about 1 percentage point in additional revenue"; (ii)
elimination of most tax exemptions yielding about 0.5 percent of GDP (Schenone, 1999); (iii)
a strong revenue collection effort by SAT, which according to Bank estimates would add no
more than 0.4-0.5 percentage points of GDP in cumulative terms; and (iv) other tax rate
increases  jointly   agreed   for  an
additional 0.5-0.6 percent of GDP.                    Figure 111.4 - Illiteracy
>   Literacy rate. A one-year rescheduling       38
is needed under the present promotion         36                            Target
rate (Figure 111.4). Meeting the 2000                                   ---- Rescheduled
target would imply that CONALFA: (i)                                      -
c  32
succeeds in registering  189,000 and      I
195,000 illiterates in 1999 and 2000; (ii)   30
raises the approval or promotion rate        28
from 37 to 40 percent; and (iii) executes    26
in 1999 and 2000 the estimated average           1995  1996  1997  1998  1999  2000  2001
cost of reducing 1 percent of illiteracy  Target  35.8  346 334 32 2  31  30    30
Rescheduled  358  347  336  326  314  307  30
of US$4.4 million (Statistical Annex,
Tables 35).
>   Three years of primary education. A seven-year rescheduling appears necessary given
present enrollment, dropout, repetition and promotion rates(Figure 111.5). Meeting this target
by 2006 would require that: (i) the combined PRONADE and Afternoon-cycle programs
succeed in absorbing a minimum of 75,000 new students per year; (ii) enrollment rates in the
traditional system remain constant, and that they increase in the PRONADE and the
Afternoon-cycle systems by an average of 61,000 and 14,000 students per year over 2000-03;
(iii) the average annual cost of enrolling a student remains constant, Q969 in PRONADE and
Q707 in the traditional schools; (iv) promotion rates increase by an average 0.5 percent per
year; (v) repetition rates decrease
by an average 0.5 percent per year;           Figure 111.5 - Three-Years Schooling Gross
(vi) dropout rates decrease by                           Coverage Gap
about 0.16 percent per year; (vii)      101
1,531 additional schools are built,
half of those actually required by
the overall enrollment gap and for
a budget of US$79.4 million; and
(viii)  adequate    financing  is        89                                Targe
available, given that the average
cost   of    expanding    primary        83
education  coverage  by  1 percent is  T get  84  88  92  96 100  100  100  100  100  100  100  10 )
US$3.9/US$14.8 million per year,    Rescheduled 84 85 86 89 91 92 94 95 97 98 99 10
excluding/including infrastructure
(Statistical Appendix, Table 36).
>   Maternal mortality rate. This indicator may need to reconsidered. The lack of regular
annual data and complex statistical problems associated with health surveys prevent its
adequate monitoring. Regression estimates show it has no regular trend and data collection is
unreliable (Barillas and Valladares, 1999). Under-reporting is so serious that even if IAHS
2 The Income and Expenditure Survey being carried out by INE, will allow updating the literacy and gross/net primary
education coverage rates, and estimate the distributive impact of raising the VAT.
3CONALFA had an extraordinary allocation of 3.7 percent of the budget of the Ministry of Education in 1999. but
since Constitutional reforms were not approved, such allocation ends this year. However, an extraordinary allocation is
included in the budget 2000.


42
succeeds in expanding its coverage in rural areas, the preventive/curative health ratio is met,
and financing support is maintained, this ratio could increase if these efforts lead to better
reporting.
> Infant mortality rate. Under
Figure 111.6 - Infant Mortality Gap    present  trends,  a   seven-year
43rescheduling would also appear
necessary, as the effort required to
~                                  decrease this rate becomes more
- Rescheduled
-difficult as it approaches single
8 2figures (Figure 111.6). Meeting this
28                                             target in 2006 implies that IAHS:
S23,                                            (i)  continues   expanding   its
Is-                                     "7-   coverage   with   100,000   new
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 20062007  beneficiaries per year; (ii) the
Target  39.9 36 32 28 24 20 20 20 20 20 20 20 20   peace     target    ratio    for
39.9 39.9 3B5 37 35.3 33.5 31.7 29.8 28 26.2 24.3 22.5 20.7  preventive/curative health is met;
(iii) the number of participating
NGOs, currently 73, can be expanded to support service expansion; and (iv) the health budget
increases by a minimum of US$4.4 million per year, given the estimated average cost of
reducing 1 percent of infant mortality of US$2.2 million (Barillas and Valladares, 1999)s
f Poliomyelitis and measles eradication. Vaccination coverage should be considered to
formally replace certification of cases as the official indicator. Data collection on cases
shows improvement with the IAHS, but this remains limited to the areas where it works. On
the other hand, PAHO has suggested collecting data
on vaccination coverage by municipality (PAwO,    Table [1  . Average   nost of
1998), as vaccination campaigns are being carried  Reducing/icreasing I %  Point of
out with the support of IA(S and the municipalities.  Target ( Mibnons USS)
Under present trends, reaching an   85 percent
coverage of children below 5 for polio will be met  gv Illiteracy: USa4.4 M.
this year. Meeting 95 percent minimum coverage of    3 Years Gross Enrollent:
children below I  for measles, however, would only  w o Infrasucture USi3.9 
be achieved by 2002, suggesting the target should be  wi Inftructure: US$ 14.8 M.
rescheduled. As both campaigns are closely related, a   M    ortity: US1.  M
achieving 100 percent vaccination coverage would,
require a minimum annual investment of about $0.5
million in the next 3 years (Table 111.2).
D. The Need for Complementary Performance Indicators
3.10   Success in sustaining expenditure reform critically depends on the fiscal space created by
the SAT and a set of complementary policy commitments to be agreed by the Fiscal Pact, which
involves key actions on the revenue and expenditure side (para. 1.29). Monitoring performance
in complying with peace objectives, however, should also track selected complementary non
fiscal social outcomes and outputs, an extremely useful tool to assess the impact of increased
spending on development and peace commitments. Table 111.3 presents a possible set of
revamped and complementary education and health indicators at the municipal level, and with a
rural, ethnic and gender focus.
We also explored a scenario leading to an accelerated fulfillment of this commitment, and estimated its overall
financial needs at US$182 million (0.9 percent of GDP); but fulfillment would be constrained by the lack of
implementation capacity from present NGOs and local service deliveIy agents.


43
Table 111.3 Revamping Performance Indicators For Social Expenditure Reform
Peace Baclmarks                     Complementary Se
Fiscal              Social              (by municipality. sex and
Goal                (Total)             (Total)                  Urban/rural)
Education                                                    Outcomesoups
Broader and more    Education spending   Literacy rate       CONALFA promotion razes
Efficient and equitable Geographic allocation of Gross primary education Number of PRONADE students
access to higher quality spending        coverage            Niber of new bilingual schools
Education with a rural &                                     Drojiout, repetition and promotion rates
Gender focus                                                 Studentsftcacher ratio in primary
Education
Health                                                       Outcomes/outputs
Broader and more    Health spending     Infant mortality rate  Number of heafih posts under IAHS
Efficient and equitable  Preventive/curauive ratio Polio & measles cases  Number of water & sanitation projects
Access to preventive  Geographic allocation of               Number of nutrition projects
Health services     spending                                 Immunization coverage
Prenatal /transmissible sicknesses in
infant mortality
3.11    Monitoring the Poverty Gap. Bridging the poverty gap remains, in the end, the most
important outcome for social expenditures. We illustrate the poverty gap in education (Figure
111.7). An analysis of data on education in Guatemala reveals three relevant findings: (i) low
initial enrollment by the poorest (70 percent) is much lower than the richest (96 percent), so
raising enrollment rates among the former, especially rural and indigenous girls, is critical to
achieve universal education; (ii) high dropout rates among the poorest is the key problem in
completing primary education-whereas almost 60 percent of the richest complete primary
education, less than 20 percent of the poorest do so; and (iii) dropout rates among the poorest are
concentrated in the first four grades rather than in the final grades, as is the case among the
richest, so completing the first four years by the poorest is essential to raise the level of their
education significantly.
3.12    Strengthening the quality of data. Indicators to monitor expenditure reform are very
weak (Box 111.3). The proposed Living Standard Measurement Survey (LSMS), supported
through the so-called MECOVI partnership (World Bank, IDB, UNDP and ECLAC), should
provide a stronger foundation to design improved monitoring indicators. The program over 1999-
03 consists of: (i) a 2000 LSMS which will permit an analysis of national poverty conditions and
assessment of the incidence of expenditure reform; (ii) annual income and employment surveys in
2001 and 2002 to track changes in employment and wages; (iii) a second LSMS in 2003 to
compare poverty trends over time and analyze targeting of public spending; and (iv) selective
qualitative surveys to better capture the dynamics of poverty and exclusion (e.g., village poverty
baseline overviews, social mapping exercises, wealth rankings, case history interviews and
measurements of social capital).


44
Figure 111.7-Attainment profiles for ages 15 to 19,
by economic group
I
0.8
0.6-
S0.4-
0.2-Mdl
0.
1     2      3     4     5      6     7      8     9
Source: Filmer and Pritckett (1998)  Grade


45
Box IIL3         Main Statistical and Methodological Data Constraints
There are a number of major methodological problems in monitoring Guaremala's peace targets:
-C  Tax ratio: Peace accords did not define the tax ratio explicitly, and this has become an issue: (i) international
practice suggests that the tax ratio should be assessed in ner terms, i.e., deducing VAT credits, whereas the
Government measures it in gross terms; (ii) before 1997, the Government did not include earmarked taxes (0 2
percent of GDP) and collected fines (0.1 percent of GDP) on its estimation; and (iii) private employer payments
for social security (1 percent of GDP--Schenone, 1999) and revenues collected by municipalities (less than 0.1
percent of GDP) are not considered as part of the tax burden.
+   Public spending targets: (i) time-series dita on public expenditure are not directly comparable since the IFMS
budget reclassification that took place In 1997, which requires a convertible code that is under preparation; (ii)
spending categories of the 1995 baseline year by sector were incomplete and, later on, were modified arbitrarily
(c.g, only in 1997 the Constitutionally-mandated traisfer to the San Carlos University was counted as part of
education expenditure, as well as water and sanitation programs made part of health expenditure); (iii) executed
expenditure by the social funds by sector is unavailable, since official data only register the original transfer
allocated to then but not its ex-post or actual use (iv) spending allocations and indicators are gender-blind.
*   Preventive/curadve health. Standard practice has been to classify as preventive care any health expenditure not
allocated to hospitals, but: (i) not all work under IAHS should be considered as preventive; (ii) conversely, some
services provided by hospitals can be considered preventive, e.g., vaccination or external consultations: (iii) public
spending on rural water and sanitation promrams was only officially recognized as part of preventive health in
1997 but actual spending is underestimated, since INFOM (which is assigned to manage the sector) also invests
municipal resources in water and sanitation; and (iv) hospitals under the social security agency (lGSS) are not
included as part of the health sector in the base year, so that public spending on curative health is underestimated.
Rural Infrastructure and rural development investment. Discretion and changing criteria have been the norm.
rather than the exception, in defining what projects are peace-related.
C   Literacy rates and primary education coverage: (i) inconsistency on official population growth rue estimates is
worrisome, since pre-1994 SEGEPLAN-based rates seemingly underestimated both indicators, when compared to
post-1994 INE census-based data; (ii) data collection methodology by MOE is defective because data providers
can modify them arbitrarily and there is no quality control/data verification by INE (CIEN, 1998); and (iii) the
SEA does not define whether coverage should be measured in gross or net terms.
C   Health indicators. Data is inadequate and contradictory, based on outdated surveys and dubious collection
methods by MOR. The 1995 National Maternal-Child Health Survey (NMCHS) only appeared three years later
and, contrary to international standards INE does not have a full set of annual health indicators (CIEN, 1998b).
+   Infant and maternal mortality  Both rates were derived from the NMCHS for the base-year, but as the next
survey is scheduled for 1999-00, it is useless for monitoring purposes. Data on maternal mortality are not directly
available. and those produced by the NMCHS are subject to considerable problems. Prepared through an indirect
methodology known as the -Sisters." it allows respondents, sisters or brothers of the deceased mother to give
information on an event that can be up to 12 years-old, frequently with low understanding about the reasons of the
death. Even more important, the estimated rate is a weighted average of mortahty conditions over a penod. i.e., it
does not refer to a particular year. Improved reporting of deaths at the local level, mainly associated to SIAS, also
distorts mortality rates, for they tend to increase by the simple "registry-creation" effect. Although PAHO
proposed adoption of a direct method, it would have no reference to the base year (PAHO, 1998). For their part.
data on mfant mortality are provided by INE on an annual basis based on registered deaths. Infant mortality
survey data are also more accurate, since the questionnaire's respondent us the mother, who can better explain the
causes of death and whether it happened before the child was 1 year old.
*   Polio and measles cases. There is no regular publicauon on epidemic illnesses, but in 1997 PAHO suggested
adopting international standards in terms of vaccination minimum coverage at the municipal level. (PAHO,
19981



TECHNICAL ANNEXES
Annex A Guatemala: Projections of the Tax Revenue
Annex B   The Growth-Fiscal Deficit Gap
Annex C   Factors Present Prior to Fiscal Stress
Annex D   Contingent Liability Estimates for Several Countries
Annex E   IFMS Status and Best Practices in Public Financial Management
Annex F   CABEI, IDB and World Bank Loan Approval Procedure Delay
Annex G   Progress Report on the Recommendations Made by the WB/ PIR
1997



46
Annex A
Guatemla: Projefions for the Tax Revenue
1998                1999                  2000
WB      MnFin       WB        MnFmn       WB        MnFin
(In nillns ofquetzaes)
1998: M  ~asums pposed to the Comis6n de AcompeNnn
1. Extensiån ofthe tEMA                                                            349.3    402.1        774.2     958.4
Goss oiectim                                                                    349.3    402.1       1008.2   1008.2
L.ess: Cedit again the inme tax                                                   0.0       0.0       -234.0    -149.8
2.bewUSI                                                                            0.0       0.0       200.1     200.1
3. Adminisxative~eas:                                                              406.4     761.8       769.7    1977.4
SAT                                                                              406.4     541.8       769.7    1757.4
Veificatie of i trin (net effect)*                                                0.0     220.0         0.0     220.0
4. Posponannt oftheta[iffreducni                                                    63.4     125.0       153.9     153.9
Esfinated yield of the new nmare                                                  819.1    1288.9      1897.9    3071.8
lrjected tax ratio withot additional neaurs                   8.90      &90        8.50      850         8.10      8.10
1. Extesie of thEMA                                                                 0.26     0.30         0.53      0.66
Gless coiecti~                                                                    0.26      0.30        0.69      0.76
Less: gdit agains the icome tax                                                   0.00      0.00       -0.16     -0.10
1998: M ures apprved by Coiión de Acmpamienta                                  0.26     0.30         0.53      0.66
jP   c  tax ratio befonin   g SAT                               90       &90         76        80         8.62       76
Adnb~saienams
2. SAT+ Verification ofipost prices*                                                0.30      0.56        0.50      1.35
3. Taxamesy                                                                         0.30      0.20
Projected tax ratio wfit idenified meaures                     &90      &90         9.36      9.56        9.13     10.11
Nominad GDP(ni~on Q)                                      121,643             133,736.6             146,489.1
*Kvtfcatim fes ar nøt paidbyusas; ifthey ar, it c~ ke hi .
Somm: Mnisty ofFmance, W~d Bank and IMF staffestimate.


47
Annex B
The Growth-Fiscal Deficit Gap
Assessing the fiscal deficit and growth trends toward sustainable levels is a complex issue that
depends on alternative models with many variables. The growth-fiscal deficit gap model is a useful
guide for policy makers and analysts as a standard toolkit of country economic analysis and one of the
main performance indicators for country reports by the IMF and the World Bank.'
In the growth-fiscal deficit gap model, two easily available economic indicators are examined: The
ratio between the fiscal deficit and GDP growth, and its relationship with total public debt-to-GDP.
To put it in simple terms, the fiscal deficit is covered, every year, by an increase in the public debt,
either domestic or external. If the fiscal deficit rises, it may be unsustainable unless GDP grows
sufficiently to repay the debt principal and interest coming due and/or the debt-to-GDP ratio also
increases to finance it. Such a simplified relationship between fiscal deficits, GDP growth and the
debt-to-GDP ratio is expressed by a simple equation that represents the change over time of the debt-
to-GDP ratio (D/GDP). In mathematical notation, this change over time, written as a "*" over the
variables, is decomposed as follows:
*          *                *
D/GDP = (D/GDP)+(D/GDP) GDP/GDP
*                                                           *
where D is the change in the amount of debt, equal to the fiscal deficit; and D/GDP is the measure of
the fiscal deficit as a share of GDP. In economic terms, the equation tells us how the fiscal deficit is
financed. The fiscal deficit (as a share of GDP) is equal to the change in the debt to GDP ratio plus
the growth rate multiplied by the debt to GDP ratio at the beginning of the period. Thus, assuming
the country decides to keep its debt-to GDP ratio constant, the equation expresses the common
thought that unsustainable fiscal deficits can not be corrected unless GDP growth increases or fiscal
deficit decreases or, preferably, both.
The equation also assesses which way a country is headed according to its fiscal deficit and growth
rates achieved in the most recent years. To do this, we first estimate the debt-to-GDP ratio. This
ratio defines the "ceiling" value for a sustainable fiscal deficit/GDP growth. In terms of the equation
depicted above, assuming the first term of the right-hand side is equal to 0 yields
D/GDP = (D/GDP) GDP/GDP or, rearranging, D/GDP = (D/GDP)/GDP/GDP, i.e. the fiscal deficit-
to-GDP growth rate should match its ceiling debt-to-GDP ratio. Hence, if the projected fiscal deficit
is 3 percent of GDP and the growth rate is 4 percent, i.e. a fiscal deficit-growth rate ratio of 75
percent; and the "ceiling" debt-to-GDP ratio is 20 percent, budget sustainability would require to
bring the deficit/growth ratio down to 20 percent, i.e. a fiscal adjustment of 2.2 percent. This would
yield a fiscal deficit/growth rate of 20 percent [(0.8/4)x1OO].
I IMF, Overview of Developments in Countries with Stand-by and Extended Arrangements Approved During 1988-91,
Policy Development and Review Department, 1994; The World Bank, Adjustment Lending in Sub-Saharan Africa: An
Update, Report No.16594, 1997, and Fiscal Management in Adjustment Lending, Report No.16040, 1996.


Annex C
Factors Present Prior To Fiscal Stress
Over-
Excessive  Bank     Asset-   Macro-    Exchange     Macro-   Terms of Capital Economic hang
Financial Sector Credit  External   Price  economics Rate Mis-    economic    Trade  Account   Contr-   from
Country       Period   Iberalization  Growth Borrowing Inflation Imbalances alignments Stabilization  Shock  Shock   action  NFPEs
Asia/Pacific
Australia  1989-92           x           x                            x
India       1994-present     x                                                              x                                   x
Indonesia  1992-present      x           x                                                  x
Jap6n      1992-present      x           x                  x                               x
Malaysia   1985-88           x           x                  x         x                                x
Philippines  1981-87          x          x         x        x                                          x       x
Thailand    1983-87                      x                  x
1997              x           x        x         x        x          x
Iatin America
Argentina  1980-82            x          x                  x         x         x
1995                                                                                                x
Brazil     1994-present                  x                            x                     x                  x                x
Chile      1981-86           x           x         x        x                   x                      x
Colombia   1982-87            x          x                                      x
Mexico     1994-present       x          x                                       x                             x
Uruguay    1981-84            x          x
Venezuela  1994-present       x                             x         x          x
Guatemala*/ 1995-98           x          x                            x         x                      x                x
Westerm Europe/US
Finland    1991-94            x          x         x        x                    x                     x                x
Norway      1987-93           x           x        x        x                    x                     x
Sweden      1990-93          x           x         x        x                   x
United States 1980-92         x          x                  x                   x
Middle East
Egypt       1991-95                                                                         x                                   x
Kuwait     1982                                             x
1990-91
Israel     1983-84            x                             x         x
Turkey     1982-85                                                                          x
1994                                                      x          x                              x
Central Europe/Transition Economies
Czech Repub 1991-present     x                                                                         X                X       X
Hungary    1987-present       x                                       x                     x          x                x       X
Kazakhstan 1991-95            x                                                             x          x                X       x
Latvia      1995-present      x                                                             x          x                x       X
Lithuania  1995-present       x                                       X                                X                x       X
Poland      1991-present      x                                                             X          x                        x
Russia     1992-present                                      X                        X                                 X       X
Sources: Standard & Poor's Credit Week 1997
*/Estimate for World Bank
48


49
户…


so
Annex E
THE IFMS AND BEST PRACTICES IN PUBLIC FINANCIAL MANAGEMENT
THE FRAMEWORK OF FORMAL AND INFORMAL RUILES. The formal rules are
embodied in the legal framework - the constitution, the organic budget law, the IFMS incoming
law, norms and legislation on finance regulations - and in the procedures of the legislature and
the executive. The informal rules tend to be reflected in what actually happens. Guatemala may
have an exemplary set of formal rules, but they are meaningless if they cannot be enforced
because of the more powerful informal rules. The key point is that any assessment of the
institutional arrangements requires that both the formal and informal rules - and the nature of
their enforcement - be understood. Assessing the effectiveness of the legal framework and in
understanding the informal rules follow.
LAW    AND RULES                   ADEQUATE    INADEQUATE      Improvements
Needed
There are checks and balances in the system                          Approval of
(e.g. executive and legislative, committing and             X        Comptroller
spending, external and internal audit).                              General's Office
There is a requirement that tax revenue be paid  X                   Law
into consolidated revenue fund and funds can
only be spent by appropriation of the legislature.
A- Formal rules require minimum ex ante controls  X
on expenditure.
Rules  do  not unnecessarily  circumscribe     X
managerial capacity at service delivery.
+   Laws require a comprehensive budget.          X
Extra-budgetary funds are transparent and valid.  X
The budget is executed as legislated.          X
Rules govern whether the legislated budget can  X
be adjusted during execution.
There are incentives for working with the best  X
possible estimates of resources.
Next year's budget is not based primarily on   X
what was spent in, or appropriated for, this year.
The central budget agency relentlessly pursue  X
savings for return to the treasury.
Rules require timely publication of information  X
for transparency and to enhance accountability.
There are sanctions for overspending and poor  X
program and project performance.         I           I             I                   I


51
BUDGET COVERAGE AND STRUCTURE. The basis for sound government finances is a
single central fund into which revenues are received and out of which public activities for citizens
are paid. For good microeconomic management, controls need to be exercised over all revenues
and expenditures. Activities placed outside the official "budget" are not subject to the discipline
of the resource allocation process. A comprehensive budget process promotes allocative
efficiency because it forces trade-offs between the different ways a government uses financial
resources. Budget coverage that results in efficient use of resources consists of total revenues and
all budgeted expenditures, including funds that usually are not reported such as extrabudgetary.
Budget structure that results in efficient use of resources consists of capital and recurrent (or
operating) spending, and country-financed and aid-financed spending.
BUDGET COVERAGE & STRUCTURE                   ADEQUATE    INADEQUATE     Improvements
Needed
+   The  budget  covers  total  revenue  and      X
expenditure.
+  No funds or financial mechanisms are excluded.  X
+0- Donor finance is channeled into the budget.                X          Aid is under-
+   Earmarking is limited.                        X                        registered
*  Laws on earmarking can be modified or limited.  X
+   Special funds are separately or supplementary  X
budgets are limited.
*   State enterprise investments financed from    X
budget are included in the capital budget.
+  Measures taken to improve coordination of      X
autonomous agency investment without full
incorporation into the government budget.
+  An attempt is made to calculate and forecast                X       Improved costing
recurrent cost implications of investments, and                     accuracy & more
results are reflected in the annual budgets.                        frequent exercise
BUDGET POLICY AND PLANNING. The system aims to provide a medium-term framework for public
expenditure by identifying the resources that are to be available and the strategic sector priorities that will
drive resource use. Political ratification to the policies/programs should be the basis of budget proposals.
BUDGET POLICY AND PLANNING                  ADEQUATE    INADEQUATE     Improvements
Needed
+   Policy/planning provides a realistic framework  X
for public expenditure rather than a "wish list."
+   It links macroeconomic and revenue projections  X
with public expenditure proposals.
+   The planning framework is made public and                  X       There is no
widely disseminated.                                                planning system
4+  The planning framework is updated regularly                X       Ad-hoc exercise
(annual/mid-term economic plan review).                             for CG meetings
+   Government's policies are accessible and clearly           X       Dissemination by
articulated in each sector.                                         Government
4+  The policy process drives any PIP.                         X       A PIP framework
+   The policy/planning process is tightly linked to           X       An operative
the budget. Affordability influences decisions.                     Public Investment
+   Conflicts  between  resource  needs  and      X                    Plan
availability are resolved in appropriate decision
making arena.
+   Needs, as perceived by Agencies, are prioritized  X
and made consistent with available resources.
4   A decision-making forum at the center demands  X


52
information to facilitate decisions, increasing
transparency and accountability for results.
Similar arrangements at the sector level promote
effective implementation at the operational level.
+0- Decision makers at all levels held accountable               X        Accountability still
for authority (flexibility) provided to them.                         is a vague concept
BUDGET PREPARATION. The process of annual budget preparation follow several stages:assessment
of overall resource availability and the adoption of aggregate expenditure and revenue targets;
disaggregation of targets into ministry ceilings; preparation and distribution of budget guidelines, including
ministry ceilings, and their distribution to spending ministries (the "budget call circular"); preparation of
submissions by spending ministries and departments; review of submissions by the Finance Ministry; and
submission to and approval by Congress of draft estimates. The determination of ceilings are crucial stages
for the budget process to be credible. Aggregate targets must be agreed upon at the political level. Often,
most budgets are incremental, taking last year's allocation as base, adding a small percentage for inflation
and, perhaps, a little real growth. Step-budgeting may reflect a mismatch between policies and resources.
BUDGET PREPARATION                      ADEQUATE    INADEQUATE       Improvements
Needed
4 The budget preparation cycle has logical X
sequence and timing.
*   The macroeconomic and revenue forecasts, and                 X         Higher accuracy of
budget ceilings are linked.                                             the assumptions
4P The budget circular is timely and provides a     X
clear set of rules for the budget process.
+   Budget ceilings are determined for sector       X
ministries.
+   Ceilings cover both recurrent and   capital     X
components of the budget.
+   They are communicated prior to the preparation  X
of the sector submissions.
+   Mechanisms require a medium-term perspective                 X        Multiyear Budget
to decision making.
4   Estimates for the capital budget reflect total  X
costs of projects, not only those of a single year.
*. Earmarking does not play a significant role in   X
the allocations of funds and is not distortionary.
+   No arbitrary cuts are made.                     X
*  Budgeted costs reflect realistic O&M.                        X        Better budget
4   Sector ministries are consulted before budget   X                     programming
finalization.
+   Sufficient time is devoted to debating funding  X
for existing policy.
+   There is a well-defined process for considering              X        Better budget
new policy proposals.                                                 programming
+   All relevant issues, information and stakeholder  X
perspectives are available to decision makers.
AID MANAGEMENT. Increasing external aid flows impact on several phases of the budget process.
Preserving consistency between donor and government priorities (some projects are funded because of the
availability of funds rather than consistency with government priorities), and keeping track of how much
donors have disbursed, what the funds have been spent on, and whether government obtained value for the
money is essential.


53
AID MANAGEMENT                       ADEQUATE    INADEQUATE       Improvements
Needed
4   All aid is incorporated in the budget.                       X         Single Register at
+   Aid projects are derived from  the Program      X                          MIFIN
priorities, not from the priorities of donors.
+- Adequate aid coordination with roles clearly     X
defined, and Ministry responsibilities do not
overlap.
4+  Aid pledges are well coordinated. Government    X
prepares sufficiently for meetings with aid
agencies.
+   There are adequate procedures for matching                   X        Closer coordination
projects to aid agencies.                                             with the entities.
+   The  government takes * the  lead  role in      X
discussions with aid agencies.
4   In the case of direct disbursement, government is            X
involved in sanctioning expenditure.
+   Government receives expenditure statements                   X        Regular collection
from aid agencies and records them.                                   of information.
4- It provides aid agencies with progress reports                X        Ad-hoc exercise
and statements on expenditure incurred.
4   Aid management is facilitated by a coordinating              X        Work a regular PIP
medium - this may be one useful role for PIP.
BUDGET EXECUTION. Constraints in the "plumbing" of the budget are a major cause of poor program
and project implementation. Even when there is provision, MIFIN may still make tactical budget cuts by
authorizing expenditure levels well below those provided for in the estimates. Cuts tend to fall on capital
spending. Outlays on salaries, however, are rarely touched. Even where expenditure has been authorized,
there can still be problems caused by delays in authorizations, by sufficient funds in Ministry bank accounts
or by the requirements of government tendering procedures. These problems are often compounded by the
multiplicity of donor disbursement procedures. Another issue is funds fungibility. Expenditures reflect
budget categories but may be applied to purposes different from those originally intended.
BUDGET EXECUTION                      ADEQUATE     INADEQUATE      Improvements
Needed
4   Budget is approved by Congress and distributed  X
to ministries in time for the start of the year.
+   Annual cash requirements for each agency are    X
forecast, Government cash flow is prompt.
4   Line     ministries   manage      recurrent                  X           Better project
budgets/development projects well.                                     management needed
4   There is a process of rationing out releases over  X
the year and for accommodating major
expenditures occurring one time in the year.
+   MIFIN has the authority to change allocations to  X
line agencies during year.
4+ It is easy for agencies to obtain supplements to  X
their original budget.
4   Decentralized payments do not undermine         X
expenditure control.
4   Information on actual expenditure is available on  X
time for monitoring tasks.
+   Arrears are not significant as a proportion of  X
total expenditure.
4+  Agencies have a control system that ensures that  X
expenditure does not exceed budget.


54
+   The  payments system   is centralized  and                    X        Increased focus on
payments are made on time.                                             local participation
+   In a decentralized system, payments do not      X
exceed appropriation limit. There are sanctions
for overspending.
ACCOUNTING SUBSYSTEM. The accounting subsystem is at the heart of an integrated financial
management system because other subsystems depend upon it for useful, timely and reliable data necessary
for the full range of decisions made as part of the resource allocation, budgeting, and financial management
system and process. A well-performing accounting system enables inputs to be tracked and costs to be
attributed to specific government interventions. A sound system also:provides information to managers for
use in making informed decisions; permits faith in the ability to substantiate financial transactions where
necessary based upon well-organized supporting documentation; makes it possible to report results in
financial terms and, where performance data is maintained, to report costs; permits controlling current year
budgetary execution as disbursements are made and preparing future year budgets based upon actual
expenditures; provides periodic financial reporting and auditability, lending credibility to governmental
operations and strengthening accountability.
ACCOUNTING                        ADEQUATE     INADEQUATE      Improvements
Needed
4+  All accounting and budget categories or coding  X                      Transition between
schemes is fully integrated into a single common                       budget   categories
classification constant over several years.                            disrupted     the
+   The chart of accounts is comprehensive. It      X                      comparability  of
integrates accounts containing assets, liabilities,                    fiscal    accounts
government equity, revenues and expenditures.                          (still needs a dual
+   Financial statements/public accounts follow a   X                      budget statement)
recognized set of accounting standards.
+   The accounting system (cash, modified cash,     X
modified accrual, full accrual) works well.
4   There are manuals setting out the procedures and  X
regulations for the accounting system.
+   Budget execution data are recorded normally,    X
not segregated into a separate data subsystem.
+   Expenditure statements are produced regularly   X
and are available to stakeholders.
*   An annual and accurate expenditure statement                  X        Prompt publication
appears shortly after the end of the year.                             is needed
*e  The  accounts  include  aid   expenditures                   X        Better recording
undertaken directly by aid agencies.                                  I systems
AUDITING SYSTEM. The focus of auditing is to determine whether public funds have been spent for
the purposes of which they were designated. The scope of auditing should be sufficiently broad. The
objectives of an audit should include compliance with budget appropriations, and whether public funds
purchased value for money. Three recommendations to improve internal and external auditing are: To
continue building staff capacity; establish and abide by uniform and transparent standards and procedural
norms for basic financial accounting and management; and standardize and centralize control of a financial
information system for audit purposes.
AUDITING                        ADEQUATE    INADEQUATE      Improvements
Needed
+   Government accounts are audited on time.        X
+   Audit queries are responded to swiftly.                       X        More staff for CG
+   The Comptroller General (CG) is independent.    X                      Modernize    the
When it adverse reports, prompt action is taken.                       CG's Office


55
+   Government decides on the audit priorities.     X
+- A Comptroller's report was issued last year.     X
4- Reports of the CG are made public.               X
4+  The legislature has established mechanisms for  X
pursuing reports of the CG.
+   The CG follows certain standards in carrying out             X        To improve audit
audits. A manual sets out the standards.                              systems
+   The CG   undergoes external quality control                  X        Apply    external
reviews. System improvement are provided.                             quality control.
+   The CG's office has the capacity to do systems               X        Training      on
audit.                                                                systems audits
4+  Financial auditing is sufficiently effective to  X                    Comptroller's
move to performance auditing.                                         new law
+   Auditors review specifications of performance                X        To improve audit
objectives and reports on results using standards.                    standards
+   The CG employs private sector auditors to carry              X        Comptroller's
out audits on his behalf. Rules prevent hiring a                      new law
firm of auditors as consultants to the same client.
* There are requirements for internal audit within
line ministries.  Internal audit is directly                 X        To improve audit
responsible to the head of the agency.                                systems
INTEGRATED FINANCIAL MANAGEMENT INFORMATION SYSTEM (FMIS). The
IFMS computerized information system is essential to support expenditure management
activities. In the past, the information systems had little capacity for data sharing. The integrated
system is now strengthening the Government's core financial systems. Summary data from
computerized modules for similar transactions are transferable and usable within the system.
People speak the same technical and legal language across the organization and program
structures to make the integrated system work.
INTEGRATED FMIS                      ADEQUATE    INADEQUATE      Improvements
Needed
+- The accounting system is sufficiently reliable to  X
move to an integrated FMIS.
4   All national level financial regulations, rules and  X
guidelines have a common language.
4   Budgeting and accounting categories at the      X
national level have a common classification.
+ Operating unit produced financial data, centrally X
and regionally produced data in a single
financial data base is accessed by all systems.
+ There is a uniform flow of information-based X
decisions throughout the management cycle.
+4- Clear inter-linkage of data flow and reporting  X
throughout the agencies and the government.
+ The basic subsystems of the FMIS within each X
agency (budgeting, accounting, cash and debt
management systems) are fully compatible,
consistent and coordinated under a single head.
+ The basic subsystems of the FMIS at the X
national level have a unified head and control.
+   Financial management staff selection is based   X
on unified professional criteria.
+   Non-financial data are processed for purposes of             X        Needs performance
performance and cost-measurement criteria.                            monitoring ratios


56
EVALUATION. A rule of thumb for any IMFS is that no major new program should be
launched without either an extensive evaluation of similar earlier programs or a pilot program.
Close monitoring followed by an interim evaluation could provide valuable information for
decision making on expansion, modification or termination of a program. Evaluation can be ex
ante, during implementation and ex post. Well-focused and property time evaluation can: (a)
provide the information needed to bring about mid-course corrections in programs and projects;
(b) allow for the analysis and resolution of systemic or policy issues; (c) improve the design of
future operations; and (d) contribute to strategic policy and program decisions. Regular
evaluation is most effective and should include staff involved in implementing the program.
Regular independent evaluations should also be carried out. Evaluation skills within MIFIN are
needed so that budget proposals can be rigorously scrutinized based on cost-effective or cost-
benefit analysis.
EVALUATION                    ADEQUATE    INADEQUATE    Improvements
Needed
4  There is a requirement for carrying out                   X        Only some donors
evaluations by central and line agencies or by                    do, but should be
independent external agencies for a certain                       generalized
percentage of programs/projects.
4  The results are used in budget decision making.           X        Donors' report be
+  The results of ex-post evaluations are published.         X        published
4  Client surveys are routinely and frequently               X        Develop client's
carried out as part of these evaluations for                      survey
ministries and services. Results are published.
+  There are incentives in the budgetary system for          X        Link budget to
line agencies to undertake evaluation.                            outcomes
4  There is a requirement that new policy proposals          X        Develop an
are accompanied by evaluation strategy.                           evaluation system
PERFORMANCE MEASUREMENT (PM). Increasing attention is being given to performance
measurement in the IFMS, peace accords and donor projects. Performance indicators refer to
what specifically is to be measured for each aspect of performance, that is, the specific numerical
measurement that is to be made such as the "number of customer complaints" or "percentage of
customers that report being satisfied with the service they received." In an education program,
the outputs may be measured by the number of dropouts or the percentage of students advancing
to a certain grade; the outcomes by the percentage of students completing elementary school or
advancing to higher education. Project managers collect both output and outcome information.
Ideal characteristics for performance measures and indicators are:They are consistent over time
and between units, and comparisons are made only with similar programs; they should be simple,
well defined and easily understood, emphasizing aspects important to decision making; emphasis
should be given to a limited number of key measures or indicators that reflect the program's
purpose or objective or signal whether the program is worth continuing; managers' performance
are measured for areas under their control. Measurements should also include the impact and
quality of services. This means: timeliness, responsiveness to beneficiaries' needs and manner of
delivery. Quality may also be measured via surveys.
PERFORMANCE MEASUREMENT                ADEQUATE    INADEQUATE     Improvements
Needed
4  Government fosters  an  environment that      X                    Build a PM system
supports and demands performance.                                 in the FMIS
4  Managers have clear short - and long-term                 X        Design and define
performance targets.                                             I them


57
There are feedback mechanisms to supply data                    X        Adjust the IFMS to
on performance and part of them is published.                            it
The accounting system ties costs to performance,                X        Costing is part of
measuring workload, outputs and outcomes.                                the PM system
There is a systematic collection, analysis and                  X        Adjust the OFMS
reporting of performance information to verify                           to it
compliance with strategic goals.
Agencies have benchmarks based on       best                    X        Peace benchmarks
practices  with  similar  challenges, whose                              are a starting point
performance they try to match or surpass.
Agencies or managers contract to produce                        X        Issue a new civil
outputs or results with agreed resources.                                service law&norms


58
Annex F
Annex II.B
CABEI Projects to (5/24199)
Project     Board    Effectiveness                                                                               Stages        Totals    Totals
No.   Number     Approval       Date                                   Project Name                                1      2     3     4     5     6
1      1231       8/1/97      5/27198   "CA-11 Road Construction - Section Vado Hondo-el Florido"                 60     19   70    149   148   297
2      1290       3/27/98     Pending*   "Integral Development Program in Potential Irrigation and Drainage Areas'  133  16   98    247   -     247
3      1307       5/27/98     Pending*   "Rural Development in Chorti Communities"                                70     15   98    183   -      183
4      1308       5/27/98     Pending*  "Aid to Productive Sector of the Republic of Guatemala (FIS)"             83     17   97    197   -     197
5      1427      11/18/98     Pending*  "Productive Infrastructure for Sustainable Development in Frontier Zone, Gua-Mex"  174  -  -  174  -    174
AVERAGE     I           I_1_7_104                                                                                    16.8  90.8  190148      219.6
1  There is a period of 104 days (average) between the approval of a project by CABEI's Board and the time it is sent to the Monetary Board
2  There is a period of 16.8 days (average) among the reception of the document at the Monetary Board, the resolution issued by this institution
and the time it is sent to the President's General Secretariat.
3  There is approximately a period of 90.8 days (average) since the document is received by the Presidents General Secretariat,
approval by Congress, and the time it takes to be published.
4  In general, there is an average of 190 days between the Board's approval and the publication in the Official Gazette.
5  In average, there is a period of 148 days between the publication and the effectiveness date of a project.
6  In total, there is an average of 219.6 days between Board's approval and the effectiveness date of a project.
Projeds pending effectiveness date.
IDB Project to (5124199)
Project     Board    Effectiveness                                                                               Stages       Totals    Totals
No.   Number     Approval       Date                                   Project Name                                 1     2     3     4     5     6
T 1014/OC-GU      6/25/97     12/9/97   "Technical Assistance Program to Support Sectorial Reform in Infrast. & Investment"  44  3  56  103  53  156
2  886/SF-GU     8/15/97*     7/28/98    "Global Credit Program for Micro-Enterprises and Small Enterprises"      70     6    124   200   146   346
3  1048/OC-GU    10/15/97"     8/3/98    "Housing Program"                                                        29     8    98    135   152   287
4  1054/OC-GU   11/12/97"    11126/98   "Support to Education Reform Project"                                    100    11   95    206   167   373
5  1106/OC-GU     5/10/98     1/15/99   "Pre-Investment for Peace Program"                                        22     38   111   171   70    241
6  1120/OC-GU     8/12/98     Pending    "Judicial Reform Support Program "+                                      20     9    91    120   -      120
7  1147/OC-GU    11/18/98      3/8/99    "Natural Disaster Emergency Program"                                      6     2    46    54    56     110
8  1153/OC-GU     12/2/98     Pending    "Support to Agro Productive Reconversion"+                               49     9    -     58    -      58
9  1 162/OC-GU   12/16/98     Pending    "East Development Program "+                                             82     4    -     86    -      86
AVERAGE                                                                                                       46.9    10  68.7 125.9 107.3 1974
 There is a period of 46.9 days (average) between the approval of a project by the IDB Board and the moment it is sent to the Monetary Fund
2  There is a period of 10 days (average) among the reception of the document by the Monetary Fund, the resolusion issued by this institution
and the time it is sent to the Presidents General Secretariat.
3  There is approximately a period of 88.7 days (average) among the date the document is received by the President's General Secretariat,
the approval by Congress and the time it takes to be published.
4  In total, there is an average of 125.9 days between the approval by the Board and the publication in the Official Gazette.
5  In average, there is a period of 107.3 days between the publication and the effectiveness date of a project.
6  In total, there is an average of 197.4 days between Board's approval and the effectiveness date of a project.
*Ref: Legal Departament. " this project was modified on 9/9/98
This project was cancelled during its implementation and the stages were initiated from the beginrnig, + Effectiveness date pending
World Bank Projects to (5/24/99)
No.    Project     Board    Effectiveness                                                                              Stages         Totals   Totals
Number     Approval       Date                                   Project Name                                1      2    3     4     5      6
'T  GT-PE-48756   4/22/97     4/24/98   "Technical Assistance for Private Participation in Infrastructure"        76     21   140   237   115   352
2  GT-PE-7223     5/20/97     3/19/98    "Basic Education Reform"                                                 56     22   57    135   153    288
3  GT-PE-48654    8/28/97     12/11/98   "Technical Assistance for Tax Administration"                            46     20   306   372   93    465
4  GT-PE-35737   12/11/97     12/11/98   "Rural and Main Roads"                                                   85     10   174   269   93     362
5  GT-PE-48657   12/23/97     11/19/98   "Technical Assistance Integrated System of Financial Admin. Il"          52     15   188   255   71    326
6  GT-PE-49386    7/28/98      2/15/99   "Local Reconstrucci6n and Development"                                   16     18   80    114   80     194
7  GT-PA-47039   10/22/98     4/22/99   "Judicial Reform"                                                         22     2    52    76    101   177
8  GT-PE-40198   11/12/98     1/15/99    "Second Project Social Inversion Fund"                                   12     1    46    59    35     94
9  GT-PA-49619    12/3/98     Pending    "Land Administration Program""                                           77     9    -     86    -       -
10 GT-PA-54462     117/99     Pending    "Land Fund""                                                              49    11          60    -       -
AVERAGE                                                                                           49.1   12.9  130  139.3  92.6  282.3
1  There is a period of 49.1 days (average) between the approval of a project by the World Bank Board and the moment it is sent to the Monetary Fund.
2  There is a period of 12.9 days (average) among the reception of the document by the Monetary Fund, the resolution issued by this institution
and the time it is sent to the President's General Secretariat.
3  There is approximately a period of 130.4 days (average) since the document is received by the Preisident's General Secretariat, the Congress
approval and the time it take for the project to be published.
4  In total, there is an average of 139.3 days between the approval by the Board and the publication in the Official Gazette.
5  In average, there is a period of 92.6 days between the publication and the effectiveness date of a project.
6  In total, there is an average of 282.3 days between Board's approval and the effectiveness date of a project.
* The projects without information are still pending.


59
ANNEX G
Progress Report on the Recommendations Made by
the World Bank's Public Investment Review - 1997
EDUCATION
RECOMMENDATION                             ACTIONS CARRIED OUT
1. Timely supply of funds by the Ministry of Finance;  *  The implementation of the SIAF and the creation of
creation of the UDAF at the Ministry of Education in order  the UDAF at the Ministry of Education (January
to implement the SIAF.                           1997). New procedure for budget planning which
coordinates the advancement of the works with the
flow of resources; monthly estimates of the cash flow
to avoid a crisis in liquidity and periodic assignments
(monthly and quarterly) of the Ministry of Finance to
MINEDUC.
2. Internal restructuring of MINEDUC to define functions  *Reorganize and simplify the processes at MINEDUC;
and responsibilities at different levels and participants.  deconcentration of activities; reduction in the number
Improve the supply of services concentrating on priority  of offices and the creation of departmental offices.
programs: PRONADE, CONALFA, bilingual education,  *Complete assignment of the constitutional 1% and
teaching staff training, and educational texts and material.  the ministerial budget 1% to CONALFA.
0  Increase in the PRONADE coverage to 152,000
students.
N  Improvements in the coverage of bilingual education
(60 new establishments).
*  Training programs that reached 51,700 people
(teachers, directors, supervisors, trainers, and
others).
3. The restrictions that the civil service imposes on  *  There has been no reform to the Civil Service Law.
contracting highly qualified personnel, must be abided.
4. Strengthen PRONADE by clearly defining its role;  *  The creation of the Trust in order to facilitate the flow
improve its execution capacity and simplify the inputs and  of funds (November 1996).
outputs of funds.                            *  The implementation of the SIAF
0 Focusing PRONADE's work during the first three
years of elementary education and the areas that are
most lacking.
5. Transfer the investment in infrastructure to the social  *  87% of the physical investment is carried out by the
funds, although ensuring that they contract companies for  social funds.
the execution of the works. The clear coordination  *  Contracting the companies for the execution of the
between the Ministry and the funds to ensure the  projects (FIS) and transfer of resources to the
technical details and establish priorities.      communities or committees (FONAPAZ & FSDC).
0  Making up a Social Cabinet in which the funds and
the ministries participate; nevertheless, it carries out
follow-up functions of works and not as much of
assessing projects based on the social income-yield
capacity and priorities.
6. Increase, at least for the year 2000, public spending  *  The education spending executed in 1998 was 2.2%
executed in education, in relation to the GDP, by 50%  of the GDP.
over spending executed in 1995.
7. Facilitate the access of 100% of the population  *  The children registered in the first three years of
between the ages of 7 and 12 to at least three years of  elementary education represent 91% of the children
schooling before the year 2000.                  between the ages of 7 and 12 (Table 111.1).
8. Increase the percentage of literacy to 70% for the year *  Literacy accounts for 68.6% (Table 111.1)
2000.
9. Carry out the education reform and form commissions  *  Formation of the Consultative Commission.
- joint and consultative - for the design and  *  Presentation of the Education Reform Design by the
implementation.                                 Joint Commission (July 1998).
Source: Acefla and Lee (1998)


60
Progress Report on the Recommendations Made by
the World Bank's Public Investment Review - 1997
HEALTH
RECOMMENDATIONS                             ACTIONS CARRIED OUT
* Priority must be given to the infrastructure  * SIAS has been implemented in 11 departments, 8 of which are
required by the new attention model, the  already receiving the services. SIAS, however, does not
integrated health service system (SIAS), and  require any type of physical infrastructure, except where first-
the rehabilitation of infrastructure and  aid kits and biological are given out.
equipment in the new construction areas.
* It is essential that hospitals establish the   The curative area is more important in the sense of MSPAS
order of their priorities in order to achieve a  total spending (49% in 1998) (Table 111.1).
balance between preventive and-curative   IGSS and MSPAS are in the process of establishing
medicine. The improvement of the       cooperation agreements.
relationship between the ministry of health   The MSPAS has not increased the number of hospitals in the
and IGSS must be given much attention.  national network, but it has begun a maintenance program in
15 hospitals in the departments.
* Roosevelt Hospital is the hospital that has absorbed 60% of
the hospital investment during 1996 and 1997.
* The cost of each project, including doctors,  * As far as financial cooperation is concerned, the MSPAS has
medical and pharmaceutical supplies, and  not received any loan additional to IDB's (Reform Program) for
maintenance must be evaluated carefully,  US$40 million, US$25 million for MFP to reinforce health
including the possible contribution of extemal  spending, and US$15 million for MSPAS. Another IDB Health-
funds.                                 II loan was approved end-1999.
* The project execution responsibility must be  9 Drinking water projects were physically, administratively, and
transferred to the social funds, particularly in  financially transferred to the Institute of Municipal Development
the case of sanitation and drinking water  -INFOM,- because they have better relations and better
projects (36% of the health budget), at the  execution that some social funds.
same time hiring negotiators for dealing with  * In 1998, only 20% of the investment allocated had been
the private sector, municipalities, and  executed during 8 months, as opposed to 58% for 1995.
cooperatives.
f To ascertain the progress of the recent   The reform program has been implemented with the following
program on health services improvement,  results:
which has an important role in: i)     e     Approval of the Health Code.
restructuring and reforming the health  0 Implementation of SIAS in 11 departments with a
ministry, ii) providing support for increasing  coverage of close to 600,000 persons at an average
coverage and strengthening SIAS; iii)      direct cost of US$4.85-6 per person per year, for a total of
improve public hospital efficiency. These  Q66.75 million between 1997 and 1998.
efforts must be consistent with the SIAF   99 agreements have been signed with 85 NGO's up to
project, which focuses on the              August 1998.
decentralization of the public sector.    New agreements that will have a coverage of more than 2
million persons by the end of the year will hopefully be
signed soon
i  Hospital efficiency has been improved by means of the
implementation of administrative management in all
hospitals, implementation of an acquisitions program,
introduction of maintenance and beginning the
Source: Chinchilla and Klose (1998b)         extemalization of services through a pilot program at
Roosevelt Hospital. No cost recovery program has been
* implemented.


61
Progress Report on the Recommendations Made by
the World Bank's Public Investment Review - 1997
ROADS
RECOMMENDATIONS                           ACTIONS CARRIED OUT
Strengthen the Roads      *  A 1996-1999 technical training plan was implemented.
Directorate Unit at the Ministry's *  Technical assistance for supervision of works was given.
(DGC) institutional capacity for  w  A follow-up program verifies the status of the works.
planning investments in the  a  Planning technical assistance introduces an HDM system for prioritizing, in
sector.                       an economical manner, the road projects, following social, economic, &
physical parameters.
0  Purchase of new maintenance machinery.
Strengthening the environmental management program.
Improvement of the facilities.
Increase number of contracts  The number of contracts entered into for maintenance has increased over the
with private companies for the  last 5 years, from 84 in 1994 to 335 in 1998. The maintenance cost has been
maintenance of primary &  reduced, from $3,000/km/yr for paved roads & Q70,000/km/yr for secondary
secondary roads.          roads in 1994, to $2,000/km/yr for paved roads & Q50,000/km/yr for secondary
roads in 1998.
The key investment for tertiary & Currently, DGC is still the entity in charge of programming, supervising,
rural roads can be carried out by maintaining, & executing tertiary roads. The Social Funds coordinate their
DGC by contracting the Social  execution with DGC, but still depend on DGC's technical capacity. Until 1998,
Funds and municipalities for the the Municipalities had not participated actively in the construction and
execution.                maintenance of roads; as of 1999, a pilot project was introduced in the
Department of San Marcos so the Municipalities could take care of the
maintenance of the rural roads in the area.
Analyze the advantages of  To this date, this office has not been created, and it is not expected to be done
forming the Assistant General  before the next administration. Currently, the Maintenance Department by
Office for Tertiary Roads, with  Contract is the entity in charge of tertiary-road matters.
specific financial mechanisms.
Improve coordination between  Some degree of coordination exists between DGC and the Social Funds for the
the Ministry, the Social Funds,  development of larger works. Maintenance of tertiary roads is carried out by
and the Ministry of Economy for DGC's Maintenance Department.
the construction, restoration, and
maintenance of tertiary roads.
Establish work standards for  In order to ensure that the existent tertiary roads last a long time, the following
tertiary roads.           standards were established:
A. Rural roads:
*  One 4-meter wide lane;
*  made up of 3.60m-wide ballast or covering;
*  Light traffic; less than 100 vehicles daily;
*  Maximum 12% slopes;
*  Average design speed for flat, rolling, or mountainous land of 40km/h,
30km/h, and 20km/h respectively.
B. Opportunity Roads Program:
*  Two 3-meter wide lanes (6m total);
U  made up of a double treatment surface or ballast;
*  15 cm granular base and 20 cm granular sub-base;
*  Traffic greater than 200 vehicles daily;
*  Design speed of 50km/h for maximum 6% slopes, 40km/h for maximum
8% slopes, and 30 km/h for maximum 10% slopes.
Train the personnel for the  DGC trains its Social Funds personnel in the following areas:
Social Funds in obtaining funds, *  Project planning;
liquidation, and maintenance for *  Funds management assistance; &
road projects.            *   Monitoring projects management.


62
Subcontracting the final   FONAPAZ Road Restoration (support for the basic infrastructure in lxc4n,
preparation of the designs for  Quich6) is already being executed; & Construction and Enlargement of 565
the road projects in ZONAPAZ.  km of roads in ZONAPAZ is already advanced. Furthermore, several projects
of the Roads Opportunity Program are being executed in ZONAPAZ.
Continue financing the     In the 1996-2001 Roads Development Plan, the restoration and enlargement of
restoration and enlargement of  the Rutas Centroamericanas is contemplated.
the roads between the borders.
Reduce restoration costs by  *The greater road construction  or restoration contracts greater than
means of:                     US$1.5 million) are awarded by means of an international public bid. The
1. Allow greater participation  publication appears in the Development Business newspaper, 3 national
of foreign entities to submit  newspapers (including the official newspaper), and also, all the countries
offers.                    that are members of the donator organization will be invited to participate.
2. Greater decentralization   This way, foreign companies represent 60 to 100% of the offers. The
represents sharing more    participation of foreign companies has increased competition levels in
costs with the             Guatemala, causing a reduction in construction prices and in the rendering
Municipalities.            of related services.
3. Paving tertiary roads when  *There exists a pilot project in San Marcos so that by means of planning
the cost compared to its   and channeling INFOM resources and the coordination of DGC, the
useful expectancy justifies  Municipalities (making up an association of municipalities) become in
it.                        charge of the maintenance of rural roads. The Municipalities will
contribute with around US$1 million during the first four years and will be
in charge of the project as of the fifth year. The foresight for this project is
to become self-financed.
In 1999, a  study will be carried out in order to determine the strategy
f_related to tertiary roads.
Technical strengthening of the                           anTechnical assistance plan.
Roads Maintenance Fund      M      Strengthening planning by means of a new activities, budget, and
(COVIAL).                     maintenance programming outline.
"   Expert support from international advisors.
"  Training by means of conventions and specialized courses.
"   Implementation of the Integrated Maintenance Administrative system
(SAMI) with which road conditions are diagnosed digitally.
Collection of other funds by  This only exists on the road from Pal  to Escuintla, and no other project of this
means of concessions and tolls type is being contemplated in the short or medium term. The organization of
in selected cases.         the current roadways makes this process difficult because the possible roads,
which could be granted, do not have alternate routes. In any manner, there will
be a study of the possibility of carrying out concession projects for the 2000-
2010 Road Development Plan.
Source: Chinchilla and Ruata (1T998a)


63
Progress Report on the Recommendations Made by
the World Bank's Public Investment Review - 1997
POWER
RECOMMENDATIONS                            ACTIONS CARRIED OUT
1. Contemplate regulation and norms to support * Regulations issued for recommendations 2, 3, 4, & 5 in this
the General Law for Electricity.           Table.
2. Implement the market mechanisms to establish  *  Resolution CNEE No1 5-98, 26-98, & 27-98 "Mechanisms to
the tariffs contemplated by the General Law for  establish base tariffs, their maximum values, and the
Electricity.                               periodic adjustment formulas, as well as the general tariff
application conditions for all regulated consumers of the
final distribution system."
3. Accelerate the establishment of the Comisi6n  *  The National Committee for Joint Implementation (June 27,
Nacional de Electricidad (National Committee for  1997) is created by means of Governmental Agreement
Electricity).                              N0474-97.
4. Complete the restructuring of INDE.  *  INDE is separated according to law among 3 companies
(October 27, 1997):
1. INDE's Electric Power Generation Company (EGEE)
2. Transportation & Electric Power Control Company (ETCEE)
- Agreement NoOM-273-98.
3. INDE's Electric Power Distribution Company (EDEE)
*  INDE's Purchase and Contracting Regulations are published
(April 20, 1998).
5. Contemplate EEGSA's division.       *   By means of Agreement NuOM-1 58-98, definite authorization
is granted (without exclusiveness) to EEGSA to render final
distribution services pertaining to power in the whole
Departments of Guatemala, Sacatep6quez, and Escuintla.
*  By means of Agreement N0865-98, the transferring of the
onerous title of stock, which the State of Guatemala owns in
EEGSA, is authorized.
*  80% of the Govemment's stocks in EEGSA are sold at
US$520 million. 16% of all the stock will be offered to
priority investors, such as EEGSA employees and national
entrepreneurs, and the last 4% will remain in the hands of
private investors.
6. Promote private participation in the distribution, *  Resolution CNEE Nol3-98 "Distribution Service Technical
as well as the generation.                 Norms" (NTSD)
7. Before selling and assuming an adjustment in  *  The tariff adjustment was carried out during the second
tariffs, divide EEGSA's activity into two companies  semester of 1997, and the sale of 80% of EEGSA's stock
that cover areas that do not overlap in the City of  was carried in July 1998, without dividing regions.
Guatemala, in order to generate yardstick
competition.
8. Conclude the crossed debt negotiations  . *  As a result of the sale of EEGSA, the government will pay
between the state entities and the government.  the debt it has with INDE in the amount of US$300,000.
9. Introduce commercial terms in the relations  *  The tariffs that are charged are negotiated (or regulated, if so
between the municipalities that purchase in bloc,  be the case). INDE is financing the works, but the
requiring they purchase from private entities and  communities, together with the municipalities, are in charge
not from INDE.                             of the execution.
10. In order to promote competition in the  E  The signing of new PPA contracts is avoided and the
generation and allow for the development of a  effectiveness of the Wholesale Market (which operates as a
wholesale market, PPA contracts must be    "power bag") is the new mechanism to achieve transparency
avoided. In their place, EEGSA contracts must  in the negotiation.
only guarantee payments of the load capacity
(fixed costs).
11. The interconnection projects must be carried  *  A few communities are implementing power projects and a
out by the communities, not by INDE.       rural electricity plan is on the move.
Source: Prera and Urizar (1998)


64
Progress Report on the Recommendations Made by
the World Bank's Public Investment Review - 1997
TELECOMMUNICATIONS
RECOMMENDATIONS                             ACTIONS CARRIED OUT
1. To create the General Telecommunications Law  * On October 17, 1996, Decree 94-96 was enacted,
containing the General Telecommunications Law,
which has, as a main objective, to liberalize the
sector.
2. To establish a technical regulating entity  * The General Telecommunications Law, by means of
its Title II, Article 5, creates the Telecommunications
Superintendency, an eminently technical body, whose
main responsibility is enforcing the Law.
3. To rebalance the rates                    * GUATEL changed its telephone rates for both local
and international call, in agreement with a system that
should reflect the service costs, eliminating the
crossed subsidy that existed between international
and local rates. (Feb. 1997)
4. To reduce the personnel costs of the state entity  * In April 1998, severance payments were paid to
GUATEL                                       GUATEL's ex-employees (Q300.0 million) and
TELGUA, S.A. followed a competitive process for
rehiring
5. To negotiate with central government the amounts of * On one hand TELGUA, S.A., now pays taxes like any
the profits to be transferred annually       private entity. GUATEL still transfers its profit only to
the extent that it generates operational profits.
6. To adopt more efficient mechanisms for the  * The Law created Rural Telephone Development Fund
installation of rural telephones            (FONDETEL), which acts as a channel for the funds
necessary for the introduction of infrastructure of
telecommunications in the most needy regions.
Source: Prera and Urizar (1998)



BIBLIOGRAPHY
Abo, Emmanuel and Ritva Reinikka (1998), "Do Budgets Really Matter? Evidence from Public Spending on
Education and Health in Uganda," The World Bank Policy Research Working Paper No. 1926.
Acefila, Maria del Carmen and Sigfrido Lee/CIEN (1998), "Revisi6n del Programa de Inversi6n Pblica de Mediano
Plazo - Fondo De Inversi6n Social - FIS," Special Report to Guatemala: Expenditure Reform in a Post-Conflict
Country. The World Bank. December.
Allen, Bill and Barry Potter (1999), "IMF Initiatives with Governments with Contingent Liabilities," Presentation at the
QFA-TG meeting on January 21, 1999,
Anderson, Maria Elena (1999), "Estimaci6n de los Requerimientos Financieros para el Cumplimiento de las Metas
de Impacto en Educaci6n dentro de los Acuerdos de Paz," Special Report to Guatemala: Expenditure Reform in a
Post-Conflict Country, The World Bank. February.
Aschauer, David and Ulrich Lachler (1998), "Public Investment and Economic Growth In M6xico," The World Bank
Policy Research Working Paper No. 1964.
Asociaci6n de Bancos de Guatemala-ABG (1998), "Diferencial de Tasas de Interds," Memo.
Barillas, Edgar/ISEP (1999), "Inversiones en Salud, Equidad y Pobreza: Guatemala," PAHO.
Barillas, Edgar and Ricardo Valladares (1999), "Estimaci6n de los Requerimientos Financieros para el Cumplimiento
de las Metas de Impacto en Salud dentro de los Acuerdos de Paz," Special Report to Guatemala: Expenditure
Reform in a Post-Conflict Country, The World Bank, March.
Barillas, Edgar and Ricardo Valladares (1998), "Inversiones en Salud, Equidad y Pobre-za: Guatemala," The World
Bank/United Nations Development Programme and Pan American Health Organization. October.
Burki, Shahid Javed, Guillermo Perry and William Dillinger (1999), Beyond the Center: Decentralizing the State, The
World Bank.
Burki, Shahid Javed and Guillermo Perry (1998), Beyond the Washington Consensus Institutions Matter, The World
Bank.
Burki, Shahid Javed and Guillermo Perry (1997), The Long March - A Reform Agenda for Latin America and the
Caribbean in the Next Decade," The World Bank.
Burnside, Craig and David Dollar (1998) "Aid, the Incentive Regime, and Poverty Reduction," The World Bank,
Macroeconomics and Growth Group-Policy Research Working Paper No. 1937.
Calvo, Guillermo (1995), "Varieties of Capital Markets Crisis," Mines, University of Maryland.
Caraballo, Joaquin (1996), "Guatemala - Public Investment Review - Highway Sector," The World Bank.
CEPAL (1998), El Pacto Fiscal - Fortalezas, Debilidades, Desafios, Mdxico, D.F.
Chambers, John and Virginia Manzer (1998), "Global Financial System Stress: Leading Indicators Signal Pressure in
16 Countries," The World Bank, Memo.
Chesterfield, Ray and Fernando Rubio (1998), "El Estado de la Educaci6n Primaria en El Quich6 en Relaci6n a otros
Departamentos servidos por DIGEBI y a Ciudad de Guatemala," Ministerio de Educaci6n-Direcci6n General de
Educaci6n Bilingue Intercultural (DIGEBI) - Proyecto "Medici6n de Indicadores y Resultados (MEDIR).
Chinchilla, Ligia and Eduardo Ruata/IDC (1998a), "Revisi6n del Programa de Inversi6n Pblica de Mediano Plazo-
Secci6n Carreteras," Special Report to Guatemala: Expenditure Reform in a Post-Conflict Country, The World
Bank, December.
Chinchilla, Ligia and Peter Klose/IDC (1 998b), "Revisi6n del Programa de Inversi6n Pfiblica de Mediano Plazo-Sector
Salud," Special Report to Guatemala: Expenditure Reform in a Post-Conflict Country, TheWorld Bank, December


Chocano, Manfredo and Martin Prera/CIEN (1999a), "Fondo de Solidaridad para el Desarrollo Comunitario-FSDC-,"
Special Report to Guatemala: Expenditure Reform in a Post-Conflict Country, The World Bank, March.
Chocano, Manfredo and Martin Prera/CIEN (1999b), "Evaluaci6n de la Inversi6n del FIS y de las Municipalidades en
1997," Special Report to Guatemala: Expenditure Reform in a Post-Conflict Country, The World Bank, May.
CIEN (1999a), Efectos Macroecon6micos de la Ampliaci6n Presupuestaria," memo
CIEN (1999b), "Proyecto del Presupuesto de Ingresos y Egresos del Estado-Ejercicio Fiscal 1999," Informe al
Congreso No. 40.
CIEN/PREAL (1999c), "Anilisis del Impacto de la Autogesti6n - La Experiencia del PRONADE."
CIEN (1999d), "Modemizaci6n del Estado - La Agenda Pendiente."
CIEN (1998a), "Anilisis del Impacto de la Autogesti6n: La Experiencia del Programa Nacional de Autogesti6n para el
Desarrollo Educativo PRONADE," Resumen Ejecutivo.
CIEN (1998b), "Sistema de Indicadores para la Evaluaci6n de la Polftica Econ6mica y Social," elaborado para la
Fundaci6n 2020.
CIEN (1998c), "Ejecuci6n del Presupuesto de Ingresos del Estado - Segundo Cuatrimestre de 1998," Informe al
Congreso No. 41.
CIEN (1998d), "Presupuesto de Ingresos y Egresos del Estado, Ejercicio Fiscal -1999-, Informe al Congreso No. 40.
CIEN (1996), "Historia de los Fondos en Guatemala," Auxiliar Proyecto Presupuesto 1997.
CIEN/CIPE (1998a), "Educando para la Paz," Hacia la Paz y el Desarrollo Magazine. Aflo I - Edici6n 2.
Collier, Paul and David Dollar (1999), "Aid Allocation and Poverty Reduction," The World Bank-Policy Research
Working Paper No. 2041.
Comisi6n Paritaria de Reforma Educativa (1998), Disefto de Reforma Educativa.
Devarajan, Shantayanan and Vinaya Swaroop (1998), "The Implications of Foreign Aid Fungibility for Development
Assistance," The World Bank, Memo.
Devarajan, Shatayanan, Vinaya Swaroop and Heng-fu Zou (1996), "The Composition of Public Expenditure and
Economic Growth," Journal of Monetary Economics, 37, 313-344.
DevTech Systems, Inc. (1998), "PRONADE: Guatemala," Reforma Magazine, Vol. 1, No. 2, pp.1-3.
Dollar, David and Jakob Svensson (1997), "What Explains the Success or Failure of Structural Adjustment
Programs?," The World Bank.
Dos Santos, Paulo Sdrgio (1999), "Guatemala, Estudio Sobre la Administraci6n Tributaria Central," Report to the
Fiscal Pact.
Easterly, William (1999), "When is Fiscal Adjustment an Illusion?," The World Bank-Policy Research Working Paper
No. 2109.
Edwards, Sebastian (1999), "Macroeconomic Prospects and Challenges in Guatemala," Memo.
Escobar, Germ6n (1998), "FONATIERRA Financial Management Assessment," The World Bank, Memo.
Filmer, Deon and Lant Pritchett (1998), "The Effect of Household Wealth on Educational Attainment-Demographic
and Health Survey Evidence," The World Bank-Policy Research Working Paper No. 1980.
FIS (1998), "Guatemala: Necesidades BAsicas Insatisfechas," Direcci6n de Planificaci6n.


FUNCEDE (1998), "Informe Final Evaluaci6n Ex-Post - FONAPAZ."
FUNCEDE (1998), "Evaluaci6n del Impacto del FIS en Guatemala: AnAlisis del Grado de Focalizaci6n del FIS;
Evaluaci6n del Mapa de Pobreza y AnAlisis del Grado de Focalizaci6n del FIS a la Luz del Mapa de Pobreza."
Funes, Mauricio (1999), "Evaluaci6n de la Deuda Pdblica como Consecuencia de la Reorientaci6n del Gasto Pfiblico,
Privatizaciones y Reestructuraci6n de la Deuda," Special Report to Guatemala: Expenditure Reform in a Post-
Conflict Country, The World Bank, March.
Gonzlez Anaya, Jos6 Antonio (1999), "Labor Market Flexibility in Thirteen Latin American Countries and the United
States - Revisiting and Expanding Okun Coefficients," The World Bank Latin American and Caribbean Studies.
Gregory, Peter (1999), "Progress Report on the Modernization of the Government of Guatemala," Special Report to
Guatemala: Expenditure Reform in a Post-Conflict Country, The World Bank, March.
Honogan, Patrick (1998), "Fiscal Contingency Planning for Financial Crises," The World Bank, Memo.
Huther, Jeff, Sandra Roberts and Anwar Shah (1997), "Public Expenditure Reform under Adjustment Lending-Lessons
from World Bank Experiences," The World Bank Discussion Paper No. 382.
INE/CELADE (1997), "Guatemala: Necesidades BAsicas Insatisfechas 1981-1994."
INE/MOH/USAID/UNICEF/FNUAP (1999), "Encuesta Nacional de Salud Materno Infantil 1998/99." Memo.
IPES (1999), "Anilisis del Presupuesto General de Ingresos y Egresos del Estado 1999," Pulso Temdtico Magazine,
November.
Johnson, Simon, Daniel Kaufmann and Pablo Zoido-Lobat6n (1999), "Corruption, Public Finances, and the Unofficial
Economy," The World Bank Policy Research Working Paper No. 2169.
Kaminsky Graciela, Leonardo Leiderman and Carmen Reinhart (1997), "Leading Indicators of Currency Crises" IMF
Staff Paper, Vol. 45, No. 1, pp. 1-48.
Kaminsky Graciela and Carmen Reinhart (1997), "The Twin Crises: The Causes of Banking and Balance of Payments
Problems Forthcoming in" American Economic Review.
Karacadag, Cem and Virginia Manzer (1997), "Financial System Stress and Sovereign Credit Risk", Features
Magazine.
Kaufmann, Daniel, Aart Kraay and Pablo Zoido-Lobat6n (1999), "Governance Matters," The World Bank Policy
Research Working Paper No. 2196.
Kaufmann, Daniel, Aart Kraay and Pablo Zoido-Lobat6n (1999), "Aggregating Governance Indicators," The World
Bank Policy Research Working Paper No. 2195.
Kharas, Homi and Deepak Mishra (1999). "Hidden Deficits and Currency Crises", Memo.
Klein, Michael (1998), "Bidding for Concessions," The World Bank Policy Research Working Paper No. 1957.
Lavarreda, Jorge/CIEN (1998), "Revisi6n del Programa de Inversi6n Pblica de Mediano Plazo-Sector Vivienda,"
Special Report to Guatemala: Expenditure Reform in a Post-Conflict Country, The World Bank, December.
Lemus, Rafael (1999a), "Identificaci6n y Estimaci6n de Pasivos Contingentes Fiscales de Guatemala, Special Report to
Guatemala: Expenditure Reform in a Post-Conflict Country, The World Bank, May.
Lemus, Rafael (1999b), "Balance preliminar de los Efectos de la Ampliaci6n Presupuestaria," Special Report to
Guatemala: Expenditure Reform in a Post-Conflict Country, The World Bank, July.
Lemus, Rafael (1999c), "Estimaci6n de Cuenta Econ6mica del Gobierno Central para 1998," Special Report to
Guatemala: Expenditure Reform in a Post-Conflict Country, The World Bank, February.


Lemus, Rafael (1998a), "Estimaci6n de Cuenta Econ6mica Fiscal de 1997," Special Report to Guatemala: Expenditure
Reform in a Post-Conflict Country, The World Bank, August.
Lemus, Rafael (1998b), "Comentarios sobre Fondos Sociales Gastos Estimados 1997," Special Report to Guatemala:
Expenditure Reform in a Post-Conflict Country, The World Bank, November.
Lewis, Christoper M. and Ashoka Mody, "The Management of Contingent Liabilities: A Risk Management
Framework for National Governments", The World Bank,memo.
Mackenzie, Sandy (1998), "The Macroeconomic Impact of Privatization," IMF Staff Papers, Vol. 45, No. 2.
Ministerio de Finanzas Pblicas (1998), "Presupuesto General de Ingresos y Egresos del Estado 1998."
Ministerio de Finanzas P(iblicas (1997), "Los Acuerdos de Paz y las Leyes de Administraci6n y Control."
MINUGUA (1999a), "Proyecto de Presupuesto General de Ingresos y Egresos del Estado 1999."
MINUGUA (1999b), "Presupuesto de Ingresos y Egresos del Estado 1999-Tablas," Versi6n 1.
MINUGUA (1999c), "Presupuesto de Ingresos y Egresos del Estado 1999 en Relaci6n con los Compromisos Incluidos
en los Acuerdos de Paz," Versi6n 1.
MINUGUA (1998a), "Guatemala: Gastos Relacionados con los Acuerdos de Paz."
MINUGUA (1998b), "Suplemento sobre la Verificaci6n del Acuerdo sobre Aspectos Socio-Econ6micos y Situaci6n
Agraria."
Molina Saucedo, Carlos Hugo (1998), "Implantaci6n del Sistema de Inversi6n Pfiblica," Report to the IFMS Project.
Navajas, Fernando (1996), "AnAlisis Fiscal del Gasto Educativo en Guatemala," BID.
Organizaci6n Panamericana de la Salud (1998), "La Salud en las Am6ricas," Publicaci6n No. 569, Vol. I-II.
Patrinos, Harry and George Psacharopoulos, (1999), "Las Poblaciones Indigenas y la Pobreza en Amdrica Latina," The
World Bank- Estudios Regionales y Sectoriales.
Patrinos, Harry A. (1997), "Differences in Education and Earnings Across Ethnic Groups in Guatemala," The Quarterly
Review of Economics and Finance, Vol. 37, No. 4, pp. 809-821
Polackova, Hana (1998a), "Contingent Liabilities-a Threat to Fiscal Stability," The World Bank Prem Notes.
Polackova, Hana, (1998b), "Government Contingent Liabilities: A Hidden Risk to Fiscal Stability," The World Bank,
memo.
Poverty and Labor Unit (1998), "Poverty Impact of Projects, A Note on Methodology," The World Bank, memo.
Pradhan, Sanjay (1996), "Evaluating Public Spending-A Framework for Public Expenditure Reviews," The World
Bank Discussion Papers No. 323.
Prera, Carlos and Carmen Urizar/CIEN (1998), "Revisi6n del Programa de Inversi6n Pfblica de Mediano Plazo-Sector
Infraestructura, Electricidad y Telecomunicaciones," Special Report to Guatemala: Expenditure Reform in a Post-
Conflict Country, The World Bank, December.
Ral6n, Carlos/CIEN (1998), "Revisi6n del Programa de Inversi6n P6blica de Mediano Plazo-Sector Educaci6n,"
Special Report to Guatemala: Expenditure Reform in A Post-Conflict Country, The World Bank, November.
Rojas, Fernando (1999), "A Strategic View of Decentralization in Guatemala," Special Report to Guatemala:
Expenditure Reform in a Post-Conflict Country, The World Bank, March.
Schenone, Osvaldo (1999), "Guatemala: Ampliaci6n de la Base Tributaria, 1996-98." Report to the Fiscal Pact.


Schneider, Pablo (1999), "Anlisis del Programa de Reconstrucci6n Post-Mitch," Special Report to Guatemala:
Expenditure Reform in a Post-Conflict Country, The World Bank, March.
SEGEPLAN/UNDP (1998), "Politicas, Programas y Proyectos en Materias de Inversi6n P6blica, Descentralizaci6n y
Participaci6n Ciudadana en Guatemala."
SEGEPLAN/PNUD (1993), "Resumen de la Metodologia de Focalizaci6n Desarrollada por el Proyecto GUA/91/023
SEGEPLAN/PNUD."
Shah, Anwar (1998), The Impact of Public Expenditure Reviews: An Evaluation, The World Bank, Washington, D.C.
Singh, Raju Jan and Rene Weber (1997), "The Composition of Public Expenditure and Economic Growth: Can
Anything be Learned from Swiss Data?" Swiss Journal of Economic and Statistics, Vol. 133 (3), 617-634.
Sisk, Paul (1998), "The Republic of Guatemala-Second Social Investment Fund Project" The World Bank, memo.
Struben, Willem (1996), "Guatemala-Social Investment Fund (SIF) Project (Ln. 3534-GU)," Supervision Report, The
World Bank.
Swaroop, Vinaya (1999), "Towards a New Development Partnership: Public Expenditure Reform Loans." The World
Bank, Memo.
The World Bank (1999), "Towards a New Judiciary - Guatemala," Memo.
The World Bank (1998a), "Country Assistance Strategy of The World Bank Group for The Republic of Guatemala,"
Memorandum of the President of the IBRD to the Executive Directors, Report No. 18036 GU.
The World Bank (1998b), Knowledge for Development, World Development Report. Oxford University Press - New
York.
The World Bank (1997a), Health, Nutrition & Population, Sector Strategy - The Human Development Network,
September.
The World Bank (1997b), Guatemala: Investing for Peace: A Public Investment Review. Report No. 16392-GU,
Washington, D.C., July.
The World Bank (1997c), Adjustment Lending in Sub-Saharan Africa: An Update. Report No. 16594, Washington,
D.C., May.
The World Bank (1996a), Guatemala: Building Peace with Rapid and Equitable Growth, Country Economic
Memorandum - Report No. 15352, Washington, D.C.,August.
The World Bank (1996b), Fiscal Management in Adjustment Lending, Report No. 16040, Washington, D.C.
The World Bank (1995), The Social Impact of Adjustment Operations-An Overview, Report 14776, Washington, D.C.
UNDP (1999), Guatemala: El Rostro Rural del Desarrollo Humano, Guatemala.
UNDP (1998), Guatemala: Los Contrastes del Desarrollo Humano, Guatemala.
United Nations (1998), "The Situation in Central America: Procedures for the Establishment of a Firm and Lasting
Peace and Progress in Fashioning a Region of Peace, Freedom, Democracy and Development." United Nations
Verification Mission to Guatemala- Report for the Secretary-General. Fifty-second session, Agenda item 45.
Zuffiga, Alberto (1999), "Anilisis de Fondos de Inversi6n Social, II-Special Report to Guatemala: Expenditure
Reform in a Post-Conflict Country, The World Bank, February.



STATISTICAL APPENDIX
Table 1   Guatemala: Growth and Investment
Table 2   Guatemala: Combined Public Sector Expenditures, 1984-98
(Million of Quetzales)
Table 3   Guatemala: Combined Public Sector Expenditures, 1984-98
(As percent of GDP)
Table 4   Guatemala: Combined Public Sector Expenditures, 1984-98
(Million of 1992 Quetzales)
Table 5   Guatemala: Total Expenditure of Central Government by Sector
(Million of Quetzales)
Table 6   Guatemala: Total Expenditure of Central Government
(% of GDP)
Table 7   Guatemala: Total Expenditure of Central Government
(Million of 1992 Quetzales)
Table 8   Guatemala: Total Expenditure of Central Government
(% of Total Current Quetzales)
Table 9   Guatemala: Capital Expenditures of Central Government by Sector
(Million of Quetzales)
Table 10  Guatemala: Capital Expenditures of Central Government
(% of GDP)
Table 11  Guatemala: Capital Expenditures of Central Government
(Million of Quetzales)
Table 12  Guatemala: Capital Expenditures of Central Government
(% of Current Quetzales)
Table 13  Guatemala: Programmed and Actual Expenditures of the Central Government
(Million of Quetzales)
Table 14  Guatemala: Bilateral External Grants, 1998
Table 15  Guatemala: Financing of Public Capital Expenditures, 1996-97
Table 16  Guatemala: Public Fixed Investment (Million of Quetzales)
Table 17  Guatemala: Composition of Public Fixed Investment
Table 18  Guatemala: Level of Public Fixed Investment
Table 19  Guatemala: Programmed and Effective Official Loan Disbursements
Table 20  Guatemala: Official Disbursements
Table 21  Guatemala: Outstanding Public External Debt
Table 22  Guatemala: Central Government Outstanding Public Domestic Debt
Table 23  Guatemala: Central Government Bonded Debt Maturities
Table 24-A Guatemala: Savings on Interest Payments from Public Debt Restructuring,
Proposals' Results Comparison
Table 24-B Guatemala: Savings on Interest Payments from Public Debt Restructuring,
(millions of Quetzales)
Table 25  Guatemala: Social Funds Investment in 1997 and 1998, by Sector
(millions of Quetzales)


Table 26 Guatemala: Regression Estimates of the Social Investment Fund (FIS) and
Municipal focalization on Poverty for 1997
Table 27 Guatemala: Total Expenditure of Central Government by Region
(Millions of Quetzales)
Table 28  Guatemala: Total Expenditure of Central Government by Region
(as% of Total)
Table 29  Guatemala: 1998 Mitch Reconstruction, 1999 Budget Allocations and
Actual Transfers (Millions of Quetzales)
Table 30  Guatemala: Mitch Reconstruction Program Portfolio, by Executing Unit
Table 31  Guatemala: Mitch Reconstruction Program Portfolio, by Project Type
Table 32  Guatemala: Budgeted Permanent Positions as reported by DTP and ONSEC,
1995-1998
Table 33  Guatemala: Estimated Cost of the Voluntary Retirement Program as of
December 31, 1997
Table 34  Guatemala: Infant Mortality Rate, by Department (children under one year)
Table 35  Guatemala: Estimated Cost of Reducing the Illiteracy Rate by 1 percent
Table 36  Guatemala: Education Indicators, Projections and Estimated Cost of
Increasing the Gross Primary Enrollment Rate by 1 percent
Table 37  Guatemala: Comparison of Indigenous Population, by Source
Table 38  Guatemala: Amount of Mayan Language Speakers and Schools,
by Linguistic Community
Table 39  Guatemala: Indigenous Population Average Years of Schooling and
Enrollment within the 7-14 Years of Age, by Department
Table 40  Guatemala: Net Primary Education Enrollment by Area, Gender and
Percentage of Indigenous Population
Table 41  Guatemala: Student to Teacher Ratios by Department
Table 42  Guatemala: Average Teachers per School, by Department and Area
Table 43  Guatemala: Third Grade Completion Rates in Three Years by Gender,
Department and Area
Table 44  Guatemala: Percentage of Not Promoted and School Drop Outs in 1996 who
Returned to School in 1997, by Gender, Department, Area and
Grade


Table 1. Guatemala: Growth and Investment
% GDP               As % of GDP    Pub Inv/
Period      growth  ICOR     Priv. Inv. Pub. Inv. Gross Inv
1950-54          2.3     4.9      6.1      2.8    31.9
1955-59          5.4     3.1      8.7      4.9    35.5
1960-64          4.9     2.7      7.8      2.5    24.4
1965-69          5.5     2.5      9.9      2.8    22.6
1970-74          6.4      1.9    11.4      3.0    21.1
1975-79          5.4     3.3     15.2      4.4    22.4
1980-84         -0.2     6.6      8.6      5.6    38.8
1985-89          2.2     10.1    10.0      2.5    20.1
1990-94          3.9     2.6     13.3      2.5     16.2
1995-98*         4.4     2.8     11.3      2.7     19.2
1950-59          4.0      3.9     7.4      3.8     33.7
1960-69          5.2     2.6      8.8      2.7    23.5
1970-79          5.9     2.6     13.3      3.7    21.8
1980-89          1.0     8.4      9.3      4.1    29.5
1990-98*         4.1     2.7     12.6      2.7     17.6
Sources: Bank of Guatemala and Ministry of Finance.
* Data for 1998 are preliminary figures.


Table 2. Guatemala: Combined Public Sector Expenditures, 1984-98 /1
(Millions of Quetzales)
1984      1985      1986      1987     1988      1989      1990      1991      1992     1993      1994      1995      1996      1997P     1998
Total Expenditure         1539.4    1872.7    2375.9    2830.1    3843.2   4400.3    5541.9    5998.0    7144.9    9030.8   9880.6   10999.6   12513.1   14506.4   18288.5
o/w Total non-debt        1375.2    1439.6    1864.9    2240.2    2943.7   3449.6    3935.4    4411.9    5682.8    7088.7   7404.6    8323.4    9286.1   10964.4   13337.4
Recurrent                 1186.5    1555.9    2042.6    2413.5    3084.1   3516.9    4384.5    4703.1    5753.0    6933.6   7400.1    8200.6    9332.2    9406.1   11290.1
Wages & Salaries          595.0     653.4     903.8    1083.8    1276.9   1452.7    1424.7    1685.9    2278.9    2772.3   2947.1    3402.2    3358.3    3625.6    4585.1
Goods & Services          321.4     336.7     437.7     545.6     707.6    826.2     834.8     879.1    1189.6    1311.2   1214.4    1217.8    1492.3    1765.2    2147.6
Interest & BOG losses     152.5     427.6     487.4     545.9     735.0    761.1    1343.9    1416.0    1386.6    1590.3   1904.6    2002.0    2418.5    1736.3    1810.5
Foreign interest         51.3      33.7      74.4      90.0     146.6    189.6     291.4     317.3     384.8     321.6    539.2     582.1     606.5     452.0     567.8
Domestic interest        58.8      60.9     182.6     202.8     260.4    274.5     324.5     349.1     376.5     546.0    449.0     625.6     673.4     480.3     898.5
BOG losses 2             42.4     333.0     230.4     253.1     328.0    297.0     728.0     749.6     625.3     722.7    916.4     794.3    1138.6     803.9     344.2
Other recurrent           117.6     138.2     213.7     238.2     364.6    476.9     781.1     722.1     897.9    1259.8   1334.0    1578.6    2063.1    2279.0    2746.9
Recurrent (excl. Interest)  1034.0  1128.3    1555.2    1867.6    2349.1   2755.8    3040.6    3287.1    4366.4    5343.3   5495.5    6198.6    6913.7    7669.8    9479.6
Capital Expenditures       352.9     316.8     333.3     416.6     759.1    883.4    1157.4    1294.9    1391.9    2097.2   2480.5    2799.0    3180.9    5100.3    6998.4
o/wCapital (non-financial)  341.2    311.3     309.7     372.6     594.6    693.8     894.8    1124.8    1316.4    1745.4   1909.1    2124.8    2372.4    3294.6    3857.8
Revenues                  1189.4    1390.5    2016.4    2410.3    2976.9   3161.5    4095.6    5155.5    7181.9    7438.2    8138.9  10260.1   12384.0   14241.8   15885.1
Fiscal Surplus/Deficit    -350.0    -482.2    -359.5    -419.8    466.3    -1238.8  -1446.3    -842.5      37.0   -1592.6   -1741.7   -739.5    -129.1    -264.5   -2403.4
Meao: Current GDP        9470.3    11180.0  15838.1   17711.1   20545.1   23684.6  34316.9   47302.3   53985.4   64243.2   74669.2   85156.7  95478.6  107873.4  121127.3
Average CPI(1992-100)     21.4      25.4      34.8      39.2      43.4     48.3      68.2      90.9     100.0     111.8    124.0     134.4     149.2     163.0     174.4
denotes preliminary data and  * World Bank estimates using preliminary data from the Ministry of Finance.
Capital expenditure data have been reclassified using the new accounting methodology introduced in 1997, thus       Source: Ministry of Finance, IMF and World Bank staff estimates.
they differ from the one presented on the rest of this Statistical Annex. 2 Actual data for the whole period. Annual flows.
Table 3. Guatemala: Combined Public Sector Expenditure, 1984-98
(As percent of GDP)
1984      1985      1986      1987      1988     1989      1990      1991      1992     1993      1994      1995      1996      1997P     1998,
Total Expenditure           16.3      16.8      15.0      16.0      18.7     18.6      16.1      12.7      13.2     14.1       13.2     12.9      13.1      13.4      15.1
o/wTotal non-debt           14.5      12.9      11.8      12.6      14.3     14.6      11.5       9.3      10.5      11.0      9.9       9.8       9.7      10.2      11.0
Recurrent                   12.5      13.9      12.9      13.6      15.0     14.8      12.8       9.9      10.7      10.8      9.9       9.6       9.8       8.7       9.3
Wages & Salaries            6.3       5.8       5.7       6.1       6.2      6.1       4.2       3.6       4.2      4.3       3.9       4.0       3.5       3.4       3.8
Goods & Services            3.4       3.0       2.8       3.1       3.4      3.5       2.4       1.9       2.2      2.0        1.6      1.4       1.6       1.6       1.8
Interest & BOG losses       1.6       3.8       3.1       3.1       3.6      3.2       3.9       3.0       2.6      2.5       2.6       2.4       2.5       1.6       1.5
Foreign interest          0.5       0.3       0.5       0.5       0.7      0.8       0.8       0.7       0.7       0.5      0.7       0.7       0.6       0.4       0.5
Domestic interest         0.6       0.5       1.2       1.1       1.3      1.2       0.9       0.7       0.7       0.8      0.6       0.7       0.7       0.4       0.7
BOG losses                0.4       3.0       1.5       1.4       1.6      1.3       2.1       1.6       1.2       1.1       1.2      0.9       1.2       0.7       0.3
Other recunrent             1.2       1.2       1.3       1.3       1.8      2.0       2.3       1.5       1.7       2.0       1.8      1.9       2.2       2.1       2.3
Recurrent (excl. Interest)  10.9      10.1       9.8      10.5      11.4      11.6      8.9       6.9       8.1       8.3      7.4       7.3       7.2       7.1       7.8
Capital Expenditures         3.7       2.8       2.1       2.4       3.7      3.7       3.4       2.7       2.6       3.3      3.3       3.3       3.3       4.7       5.8
o/w Capital (non-financial)  3.6       2.8       2.0       2.1       2.9      2.9       2.6       2.4       2.4       2.7      2.6       2.5       2.5       3.1       3.2
Revenues                    12.6      12.4      12.7      13.6      14.5     13.3      11.9      10.9      13.3      11.6     10.9      12.0      13.0      13.2      13.1
Fiscal Surplus/Deficit      -3.7      -4.3      -2.3      -2.4      -4.2     -5.2      -4.2      -1.8       0.1      -2.5     -2.3      -0.9      -0.1      -0.2      -2.0
Meno:Nettransfers           1.4       1.3       1.5       1.6       2.6       2.8      3.0       1.9       1.8       2.5       2.6       2.6      3.0       3.8       4.9
Source: Statistical Appendix, Table 2.


Table 4. Guatemala: Combined Public Sector Expenditure, 1984-98
(Millions of 1992 Quetzales)
1984      1985     1986      1987     1988     1989      1990      1991     1992      1993     1994      1995     1996     1997'     1998*
Total Expenditure        7180.3    7360.6    6817.7   7227.0   8861.3    9106.5   8121.0    6602.0   7144.9    8076.6   7971.2    8184.9   8385.3    8898.9   10487.8
o/w Total non-debt       6414.4    5658.3    5351.4   5720.6   6787.3    7139.0   5766.8    4856.2   5682.8    6339.7   5973.7    6193.5   6222.8    6726.1    7648.5
Recurrent                5534.3    6115.4    5861.3   6163.2    7111.0   7278.3   6424.9    5176.8   5753.0    6201.0   5970.1    6102.1   6253.7    5770.2    6474.5
Wages & Salaries        2775.3    2568.2    2593.5   2767.6    2944.2   3006.4   2087.7    1855.7   2278.9    2479.4   2377.6    2531.6   2250.5    2224.1    2629.4
Goods & Services        1499.1    1323.4    1256.0   1393.3   1631.5    1709.8   1223.3     967.6    1189.6   1172.7    979.7     906.2   1000.0    1082.9    1231.5
Interest&BOGlosses       711.3    1680.7    1398.6   1394.0    1694.7   1575.1    1969.3   1558.6    1386.6   1422.3   1536.6    1489.7   1620.7    1065.1    1038.3
Foreign interest       239.3     132.5     213.5    229.8    338.0     392.4    427.0     349.3    384.8     287.6    435.0     433.1    406.4     277.3     325.6
Domestic interest      274.3     239.4     524.0    517.9    600.4     568.1    475.5     384.3    376.5     488.3    362.2     465.5    451.3     294.7     515.3
BOG losses             197.8    1308.8    661.1     646.3    756.3     614.6    1066.8    825.1    625.3     646.3    739.3     591.0    763.0     493.2     197.4
Other recurent          548.5     543.2     613.2    608.3     840.7    987.0    1144.6    794.9    897.9    1126.7    1076.2   1174.6    1382.5   1398.1    1575.2
Recurrent (excl. Interest)  4822.9  4434.7   4462.7   4769.1   5416.3    5703.2   4455.6    3618.2   4366.4    4778.7   4433.5    4612.4   4633.0    4705.0    5436.2
Capital expenditures     1646.1    1245.2    956.4    1063.8    1750.3   1828.2    1696.0   1425.2    1391.9   1875.6   2001.2    2082.7   2131.6    3128.8    4013.3
o/w Capital (non-financial)  1591.5  1223.6  888.7     951.5    1371.0   1435.8    1311.2   1238.1   1316.4    1561.0   1540.2    1581.1    1589.8   2021.1    2212.3
Revenues                 5547.8    5465.3    5786.1   6155.0   6863.9    6542.8   6001.5    5674.7   7181.9    6652.3   6566.1    7634.6   8298.7    8736.7    9109.6
Fiscal Surplus/Deficit  -1632.5   -1895.3   -1031.6  -1072.0   -1997.4  -2563.7  -2119.4    -927.3     37.0   -1424.3   -1405.1   -550.3    -86.5    -162.3   -1378.2
Source: Statistical Appendix, Table 2.


Table 5. Guatemala: Total Expenditure of Central Government by Sector (Milions of Quetzales)
1992       1993      1994       1995       1996       1997      19982      19992     2000
Sector                 Actual    Actual     Actual     Actual     Actual    Actual     Actual     Budget    Budget
Public Debt Management'                 1157.0    1357.5     1734.6     1839.3    2266.9     1629.9     1704.7     1815.4    2680.8
Internal                               363.5      443.3      426.1      594.0     650.1      456.4      885.3     707.8    1089.1
External                                168.2     191.5      392.1     451.0      478.2      369.6      475.2     807.5     1088.7
BOG losses                             625.3      722.7      916.4      794.3    1138.6      803.9      344.2     300.0      503.0
Administration and General Services     691.0      900.5      751.6     1062.3     941.4     1050.0     1343.6     1524.9    2130.0
Defense and Public Order                785.1      869.1     1008.4     1132.0    1074.2     1219.6     1476.3     1551.6   1961.3
Economic Infrastructure & Services     1541.9     1491.0     1307.4    1471.8     2016.4     3525.6     4124.9    4242.5     5851.5
Roads and Transport                    552.1      498.8      582.6      783.1    1089.7     1747.3     2045.4     1741.7    2427.2
Communications                          44.2       45.9       51.6       49.1      43.9       47.9       69.4      72.5      431.1
Energy                                  585.3     398.4      111.0       88.7      114.2     119.2      188.5      181.4     496.2
Agriculture and Mining                  182.5     259.5      313.9     291.4      262.1      323.2      414.1      562.1    643.4
Finance, Industry and Other Activities  177.8     288.4      248.3      259.5     506.5     1288.0     1407.5     1684.9    1853.6
Social Sectors                         2205.4     2895.2     3100.5     3296.5    3636.2     4813.1     7125.1     8145.7    9195.3
Education, Science and Culture         922.4     1158.0     1346.2     1411.9    1504.6     1900.0     2617.1    3039.32    3676.3
Health, Environment & Other Activities  525.7     623.5      701.5      750.4     805.7     1106.2     1377.4     1829.4    1926.7
Housing and Urban Development          298.5      597.8      461.3      534.4     693.4     1024.9     2078.3    1796.93    2157.9
ofwhich, Housing                       22.1       50.6       23.7       14.2      33.0       68.0      673.7      214.1     300.5
Municipal Works             228.7      368.7      368.7     497.8      563.5      906.0     1215.9   1325.16     1566.9
Community Devel. & Social Services     458.8      515.9      591.5      599.8     632.5      782.0     1052.3     1480.1    1434.4
Total                                  6380.4     7513.3     7902.5     8801.9    9935.1    12238.2    15774.6    17280.1   21818.9
Memo: Central Government Deficit        -510.6   -1288.3    -1230.2     -519.7     -177.2    -512.4    -2988.6    -3698.5   -4545.2
Expenditures by Social Funds      47.3      192.5      351.6     395.8      412.2      971.0     1888.7     1677.6   2054.6
Current GDP                    53985.4    64243.2    74669.2   85156.7    95478.6   107873.4   121127.3  133736.5  146489.0
AverageCPI(1992=100)             100.0      111.8      124.0     134.4      149.2      163.0      174.4     183.0     193.4
IMF data for 1990-96, Ministry of Finance and World Bank staff estimates for the rest. Excludes capital amortization.
In 1997 a new system for government financial management was introduced. To ensure comparability, the Staff reclassified figures for 1998-2000 that are compatible with
the old series IMF and IFMS staff are working together to reclassify historical data according to the new budget classification. It does not include any budget expansion
Table 6. Guatemala: Total Expenditure of Central Government by Sector(% of GDP)
1992       1993      1994       1995       1996       1997      1998       1999      2000
Sector                 Actual    Actual     Actual     Actual     Actual    Actual     Actual     Budget    Budget
Public Debt Management                    2.1        2.1        2.3        2.2       2.4        1.5        1.4        1.4       1.8
Internal                                 0.7        0.7        0.6       0.7        0.7        0.4        0.7       0.5        0.7
External                                 0.3        0.3        0.5        0.5       0.5        0.3        0.4        0.6       0.7
BOG losses                                1.2       1.1        1.2        0.9        1.2       0.7        0.3        0.2       0.3
Administration and General Services        1.3       1.4        1.0        1.2       1.0        1.0        1.1        1.1       1.5
Defense and Public Order                   1.5       1.4        1.4        1.3        1.1       1.1        1.2        1.2       1.3
Economic Infrastructure & Services        2.9        2.3        1.8        1.7       2.1        3.3        3.4        3.2       4.0
Roads and Transport                       1.0       0.8        0.8        0.9        1.1       1.6        1.7        1.3       1.7
Communications                           0.1        0.1        0.1        0.1       0.0        0.0        0.1        0.1       0.3
Energy                                    1.1       0.6        0.1        0.1       0.1        0.1        0.2        0.1       0.3
Agriculture and Mining                   0.3        0.4        0.4        0.3       0.3        0.3        0.3        0.4       0.4
Finance, Industry and Other Activities   0.3        0.4        0.3        0.3       0.5        1.2        1.2        1.3       1.3
Social Sectors                            4.1        4.5        4.2        3.9       3.8        4.5        5.9        6.1       6.3
Education, Science and Culture            1.7       1.8        1.8        1.7        1.6       1.8        2.2        2.3       2.5
Health, Environment & Other Activities    1.0       1.0        0.9        0.9       0.8        1.0        1.1        1.4       1.3
Housing and Urban Development            0.6        0.9        0.6        0.6       0.7        1.0        1.7        1.3       1.5
ofwhich, Housing                        0.0        0.1        0.0        0.0       0.0        0.1        0.6        0.2       0.2
Municipal Works               0.4        0.6        0.5       0.6        0.6        0.8        1.0       1.0        1.1
Community Dev & Social Services          0.8        0.8        0.8        0.7       0.7        0.7        0.9        1.1       1.0
Total                                     11.8      11.7       10.6       10.3       10.4      11.3       13.0       12.9      14.9
Memo: Central Government Deficit         -0.9       -2.0       -1.6       -0.6      -0.2       -0.5       -2.5       -2.8      -3.1
Expenditures by Social Funds      0.1       0.3        0.5        0.5        0.4       0.9        1.6        1.3       1.4
Source Statistical Appendix, Table 5


Table 7. Guatemala: Total Expenditure of Central Government (Millions of 1992 Quetzales)
1992      1993     1994      1995      1996     1997     1998      1999     2000
Sector               Actual    Actual    Actual    Actual   Actual    Actual   Actual   Budget   Budget
Public Debt Management               1157.0    1214.1    1399.4   1368.6    1519.1    999.9    977.6    992.1   1386.1
Internal                             363.5     396.5    343.8     442.0     435.6    280.0    507.7    386.8    563.1
External                             168.2     171.3    316.3     335.6     320.5    226.7    272.5    441.3    562.9
BOG losses                           625.3     646.3    739.3     591.0     763.0    493.2    197.4    164.0     260.1
Administration and General Services   691.0     805.4    606.4     790.5     630.8    644.1    770.5    833.4    1101.3
Defense and Public Order              785.1     777.3     813.5    842.3     719.8    748.2    846.6    848.0    1014.1
Economic Infrastructure & Services   1541 9    1333.5   1054.8    1095.1    1351.2   2162.8   2365.5   2318.6    3025.5
Roads and Transport                  552.1     446.1    470.0     582.7     730.2   1071.9   1173.0    951.9    1255.0
Communications                        44.2      41.1     41.6      36.5      29.4     29.4     39.8     39.6     222.9
Energy                               585.3     356.3      89.6     66.0      76.5     73.1    108.1     99.1     256.6
Agriculture and Mining               182.5     232.1    253.3     216.8     175.6    198.3    237.5    307.2     332.7
Finance, Industry and Other Activities  177.8  257.9    200.3     193.1     339.4    790.1    807.1    920.8     958.4
Social Sectors                       2205.4    2589.3   2501.4    2452.9    2436.7   2952.6   4086.0   4451.8   4754.4
Education, Science and Culture       922.4    1035.6   1086.1    1050.6    1008.3   1165.6   1500.8   1661.0    1900.8
Health, Environment & Other Activities  525.7  557.6     565.9    558.4     539.9    678.6    789.9    999.8     996.2
Housing and UrbanDevelopment         298.5     534.6     372.2    397.6     464.7    628.7   1191.8    982.1    1115.7
ofwhich, Housing                     22.1      45.3     19.1      10.5      22.1     41.7    386.3     117.0    155.4
Municipal Works           228.7     329.7     297.5    370.4     377.6    555.8    697.3     724.2    810.2
Community Dev & Social Services      458.8     461.4    477.2     446.3     423.9    479.7    603.5    808.9     741.7
Total                                6380.4    6719.5    6375.4   6549.5    6657.7   7507.5   9046.2   9443.9   11281.4
Source: Statistical Appendix, Table 5.
Table . Guatemala: Total Expenditure of Central Government (% of Total Current Quetzales)
1992      1993      1994     1995      1996     1997      1998     1999     2000
Sector               Actual    Actual    Actual    Actual   Actual    Actual   Actual   Budget   Budget
Public Debt Management                 18.1      18.1     21.9      20.9      22.8     13.3     10.8     10.5     12.3
Internal                               5.7       5.9      5.4       6.7       6.5      3.7      5.6      4.1       5.0
External                               2.6       2.5       5.0      5.1       4.8      3.0      3.0       4.7      5.0
BOGlosses                              9.8       9.6      11.6      9.0      11.5      6.6      2.2      1.7       2.3
Administration and General Services    10.8      12.0       9.5     12.1       9.5      8.6      8.5       8.8      9.8
Defense andPublic Order                12.3      11.6      12.8     12.9      10.8     10.0      9.4       9.0      9.0
Economic Infrastructure & Services     24.2      19.8      16.5     16.7      20.3     28.8     26.1     24.6      26.8
Roads and Transport                    8.7       6.6       7.4      8.9      11.0     14.3     13.0     10.1      11.1
Communications                         0.7       0.6      0.7       0.6       0.4      0.4      0.4      0.4       2.0
Energy                                 9.2       5.3       1.4      1.0       1.1      1.0      1.2      1.0       2.3
Agriculture and Mining                 2.9       3.5      4.0       3.3       2.6      2.6      2.6      3.3       2.9
Finance, Industry and Other Activities  2.8      3.8      3.1       2.9       5.1     10.5      8.9       9.8      8.5
Social Sectors                         34.6      38.5     39.2      37.5      36.6     39.3     45.2     47.1     42.1
Education, Science and Culture        14.5      15.4     17.0      16.0      15.1     15.5     16.6      17.6    16.8
Health, Environment & Other Activities  8.2      8.3       8.9      8.5       8.1      9.0      8.7      10.6      8.8
Housing and Urban Development          4.7       8.0       5.8      6.1       7.0      8.4     13.2      10.4      9.9
ofwhich, Housing                      0.3       0.7      0.3       0.2       0.3      0.6      4.3       1.2      1.4
Municipal Works             3.6       4.9       4.7      5.7       5.7      7.4       7.7      7.7      7.2
Community Dev & Social Services        7.2       6.9       7.5      6.8       6.4      6.4      6.7       8.6      6.6
Total                                 100.0     100.0    100.0     100.0     100.0    100.0    100.0     100.0   100.0
Memo: Expenditures by Social Funds      0.7       2.6       4.4      4.5       4.1      7.9     12.0       9.7      9.4
Source Statistical Appendix, Table S.


Table 9. Guatemala: Capital Expenditures of Central Government, by Sector (Millions of Quetzales)
1992       1993      1994       1995       1996       1997      1998 1    1999'      2000'
Sector                 Actual    Actual     Actual     Actual     Actual    Actual     Actual     Budget    Budget
Administration and General Services       75.7     207.8      133.2      355.5      96.4      142.6      197.3      271.6     732.1
Defense and Public Order                 54.9       36.0       44.0      130.6      73.7      132.1       82.7      117.1     109.4
Economic Infrastructure & Services       997.2     940.4      760.5      904.3     1212.9    2412.8     2444.5     2596.6    3575.7
Roads and Transport                     353.5     383.7      476.9      672.6     996.2     1662.4     1902.5     1760.7    2211.6
Communications                           2.0        6.7        1.6        0.6       0.1        0.0       10.1       28.2     349.8
Energy                                  583.4     364.7       94.9       47.7      54.9      115.3      184.4      194.2     487.2
Agriculture and Mining                   53.4     117.6      166.4      167.2     157.8      172.2      227.9      428.6     390.5
Finance, Industry and Other Activities   4.9       67.7       20.7       16.2       4.0      462.9      119.5      184.9     136.6
Social Sectors                          436.4      777.1      781.6      856.3    1096.6     1668.3     2840.1     3114.9    2708.0
Education, Science and Culture           83.3      90.5      163.3      152.3      163.3     267.8      519.5      631.8     226.7
Health, Environment & Other Activities   73.0     104.5      164.6      181.8     246.1      390.8      247.0      431.2     341.1
Housing and Urban Development          279.7      581.6      451.1      519.8     684.2     1009.7     2071.7     2048.9    2134.9
ofwhich, Housing                       22.0       50.3       23.7       13.5      25.2       67.2      668.9      290.2     295.3
Municipal Works             228.7      368.7      368.7     497.8      563.5      896.5     1215.9    1472.4     1566.9
Community Devel. & Social Services        0.4       0.5        2.6        2.4       3.0        0.0        2.0        3.0       5.3
Total                                   1564.2    1961.3     1719.3     2246.7    2479.6     4355.8     5564.7     6100.2    7125.2
Memo: Expenditures by Social Funds        47.3      192.5     351.6      395.8      412.2     971.0     1888.7     1677.6    2054.6
In 1997 a new system for government financial management was introduced. To ensure comparability, the Staff reclassified figures for 1998-2000 that are compatible with
the old series. IMF and IFMS staff are working together to reclassify historical data according to the new budget classification. It does not include any budget expansion.
Source Ministry of Finance
Table 10. Guatemala: Capital Expenditures of Central Government (% of GDP)
1992       1993      1994       1995       1996       1997      1998       1999      2000
Sector                 Actual     Actual    Actual     Actual     Actual    Actual     Actual     Budget    Budget
Administration and Gen. Services           0.1       0.3        0.2        0.4       0.1        0.1        0.2        0.2       0.5
Defense and Public Order                  0.1        0.1        0.1        0.2       0.1        0.1        0.1        0.1       0.1
Economic Infrastructure & Services         1.8       1.5        1.0        1.1        1.3       2.2        2.0        1.9       2.4
Roads and Transport                       0.7       0.6        0.6        0.8        1.0       1.5        1.6        1.3       1.5
Communications                           0.0        0.0        0.0        0.0       0.0        0.0        0.0        0.0       0.2
Energy                                    1.1       0.6        0.1        0.1       0.1        0.1        0.2        0.1       0.3
Agriculture and Mining                    0.1       0.2        0.2        0.2       0.2        0.2        0.2        0.3       0.3
Finance, Industry and Other Activities    0.0       0.1        0.0        0.0       0.0        0.4        0.1        0.1       0.1
Social Sectors                             0.8       1.2        1.0        1.0        1.1       1.5        2.3        2.3       1.8
Education, Science and Culture            0.2       0.1        0.2        0.2       0.2        0.2        0.4        0.5       0.2
Health, Environment & Other Activities    0.1       0.2        0.2        0.2        0.3       0.4        0.2        0.3       0.2
Housing and Urban Development             0.5       0.9        0.6        0.6       0.7        0.9        1.7        1.5       1.5
of which, Housing                        0.0       0.1        0.0        0.0       0.0        0.1        0.6        0.2       0.2
Municipal Works               0.4        0.6        0.5       0.6        0.6        0.8        1.0        1.1       1.1
Community Dev & Social Services          0.0        0.0        0.0        0.0       0.0        0.0        0.0        0.0       0.0
Total                                      2.9       3.1        2.3        2.6        2.6       4.0        4.6        4.6       4.9
Memo: Expenditures by Social Funds         0.1       0.3        0.5        0.5        0.4       0.9        1.6        1.3       1.4
Sources Statistical Appendix, Tables 5 and 9.


Table 11. Guatemala: Capital Expenditures of Central Government (Millions of 1992 Quetzales)
1992      1993     1994      1995      1996     1997     1998      1999    2000
Sector               Actual    Actual    Actual    Actual   Actual    Actual   Actual   Budget   Budget
Administration and General Services    75.7     185.8    107.5     264.5      64.6     87.5    113.1    148.4    378.5
Defense and Public Order               54.9      32.2      35.5     97.2      49.4     81.0     47.4     64.0     56.6
Economic Infrastructure & Services    997.2     841.0     613.5    672.9     812.8   1480.1   1401.8   1419.1    1848.8
Roads and Transport                  353.5     343.2     384.7    500.5     667.6   1019.8   1091.0    962.3    1143.5
Communications                         2.0       6.0       1.3      0.4       0.0      0.0      5.8     15.4     180.9
Energy                               583.4     326.2     76.6      35.5      36.8     70.7    105.7    106.1     251.9
Agriculture and Mining                53.4     105.2     134.2    124.4     105.7    105.6    130.7    234.2     201.9
Finance, Industry and Other Activities  4.9     60.5      16.7     12.1       2.7    284.0     68.6    101.1     70.6
Social Sectors                        436.4     695.0    630.6     637.2     734.9   1023.4   1628.7   1702.4   1400.2
Education, Science and Culture        83.3      80.9    131.7     113.3     109.4    164.3    297.9    345.3     117.2
Health, Environment & Other Activities  73.0    93.5     132.8    135.3     164.9    239.7    141.6    235.7     176.4
Housing and Urban Development        279.7     520.1     363.9    386.8     458.5    619.4    1188.0   1119.8   1103.8
ofwhich, Housing                     22.0      45.0     19.1      10.0      16.9     41.2    383.6    158.6     152.7
Municipal Works           228.7     329.7     297.5    370.4     377.6    550.0    697.3     804.7    810.2
Community Devel. & Social Services     0.4       0.4      2.1       1.8       2.0      0.0      1.1      1.6       2.7
Total                                1564.2    1754.1    1387.1   1671.8    1661.6   2672.1    3191.1  3333.9    3684.1
Memo: Expenditures by Social Funds     47.3     172.2     283.7    294.5     276.2    595.7    1083.1    916.8   1062.3
Sources: Statistical Appendix, Tables 5 and 9. les 5 and 9.
Table 12. Guatemala: Capital Expenditures of Central Government (% of Total Current Quetzales)
1992      1993     1994      1995      1996     1997      1998     1999     2000
Sector               Actual    Actual    Actual    Actual   Actual    Actual   Actual   Budget   Budget
Administration and General Services     4.8      10.6       7.7     15.8       3.9      3.3      3.5       4.5     10.3
Defense and Public Order                3.5       1.8       2.6      5.8       3.0      3.0      1.5       1.9      1.5
Economic Infrastructure & Services     63.8      47.9     44.2      40.3      48.9     55.4     43.9     42.6      50.2
Roads and Transport                   22.6      19.6      27.7     29.9      40.2     38.2     34.2     28.9      31.0
Communications                         0.1       0.3      0.1       0.0       0.0      0.0      0.2      0.5       4.9
Energy                                37.3      18.6       5.5      2.1       2.2      2.6      3.3      3.2       6.8
Agriculture and Mining                 3.4       6.0      9.7       7.4       6.4      4.0      4.1      7.0       5.5
Finance, Industry and Other Activities  0.3      3.5       1.2      0.7       0.2     10.6      2.1      3.0       1.9
Social Sectors                         27.9      39.6     45.5      38.1      44.2     38.3     51.0     51.1      38.0
Education, Science and Culture         5.3       4.6      9.5       6.8       6.6      6.1      9.3     10.4       3.2
Health, Environment & Other Activities  4.7      5.3      9.6       8.1       9.9      9.0      4.4      7.1       4,8
Housing and Urban Development         17.9      29.7      26.2     23.1      27.6     23.2     37.2     33.6      30.0
ofwhich, Housing                      1.4       2.6       1.4      0.6       1.0      1.5     12.0       4.8     4.1
Municipal Works            14.6      18.8      21.4     22.2      22.7     20.6      21.9     24.1     22.0
Community Dev & Social Services        0.0       0.0      0.2       0.1       0.1      0.0      0.0       0.0      0.1
Total                                 100.0     100.0    100.0     100.0     100.0    100.0    100.0    100.0     100.0
Memo: Expenditures by Social Funds      3.0       9.8      20.5     17.6      16.6     22.3     33.9      27.5     28.8
Sources Statistical Appendix, Tables 5 and 9.


Table 13-A. Guatemala: Programmed and Actual Expenditures of the Central Government (Millions of Quetzales)
1994                   1995                  1996                   1997                  1998
Budget           %     Budget          %     Budget           %     Budget           %    Budget           %
Sector        Approved Actual Diff. Approved Actual Diff. Approved Actual Diff. Approved Actual Diff. Approved Actual Diff.
Public Debt Management'   469.7   818.2  74.2    864.3 1045.0  20.9   1065.8  1128.3   5.9    819.7  826.0   0.8    1385.4 1360.5  -1.8
Internal                  163.6  426.1 160.5    270.3  594.0 119.8     415.7  650.1  56.4    362.4   456.4  25.9    481.8  885.3  83.7
External                 306.1   392.1  28.1    594.0  451.0 -24.1    650.1   478.2 -26.4    457.3  369.6 -19.2     903.6  475.2 -47.4
Administration and Gen.
Services                  1060.4  751.6 -29.1   1519.0 1062.3 -30.1   1799.5   941.4 -47.7   2204.4 1050.0 -52.4    2708.9 1343.6 -50.4
Defense and Public Order  1014.5 1008.4  -0.6   1157.6  1132.0  -2.2   1138.3 1074.2  -5.6   1232.3 1219.6   -1.0   1519.3 1476.3  -2.8
Economic Infrastructure &
Services:                 1330.5 1307.4  -1.7   1553.8 1471.8  -5.3   2448.9 2016.4 -17.7    3003.1 3525.6  17.4    3466.6 4124.9  19.0
Roads and Transport      785.7   582.6 -25.8   1072.4  783.1 -27.0    1425.2 1089.7 -23.5   2259.0 1747.3 -22.7    2351.1 2045.4 -13.0
Communications            53.7    51.6  -3.9     57.9   49.1 -15.2      51.1   43.9 -14.2    275.1   47.9 -82.6     135.3   69.4 -48.7
Energy                    128.7  111.0 -13.8     96.6   88.7  -8.2    139.1   114.2 -17.9    147.6   119.2 -19.2    200.2  188.5  -5.8
Agriculture and Mining   334.0   313.9  -6.0    300.0  291.4  -2.9    299.8   262.1 -12.6    292.3  323.2  10.6     486.6  414.1 -14.9
Finance, Industry and     28.4   248.3 774.3     26.9  259.5 864.7     533.7  506.5  -5.1     29.1 1288.0 4326.1    293.4 1407.5 379.7
Other Activities
Social Sectors:          3371.4  3100.5  -8.0   3782.4 3296.5 -12.8    5200.6 3636.2 -30.1   5466.7 4813.1 -12.0    7662.4 7125.1  -7.0
Education                1315.2 1346.2   2.4   1432.4 1411.9  -1.4    2044.5 1504.6 -26.4   1914.4 1900.0  -0.8    2549.3 2617.1   2.7
Health and Environment   691.3   701.5   1.5    780.3  750.4  -3.8    1024.9  805.7 -21.4    966.7  1106.2  14.4   1285.7 1377.4   7.1
Housing and Urban Dev.   493.7   461.3  -6.6    640.6  534.4 -16.6    861.3   693.4 -19.5   1217.5 1024.9 -15.8    2170.8 2078.3  -4.3
Community Dev. & Social   871.2  591.5 -32.1    929.1  599.8 -35.4    1269.9  632.5 -50.2   1368.1   782.0 -42.8   1656.6 1052.3 -36.5
Services
Total (incl. Interest)   7246.5 6986.1   -3.6   8877.1 8007.6  -9.8   11653.1 8796.5 -24.5  12726.2 11434.3 -10.2  16742.6 15430.4  -7.8
Total (exci. Interest)   6776.8 6167.9   -9.0   8012.8 6962.6 -13.1   10587.3 7668.2 -27.6  11906.5 10608.3 -10.9  15357.2 14069.9  -8.4
1/ Excludes capital amortization.                                                         Source: World Bank staff estimates based on MIFIN data
Table 13-B. Guatemala: Programmed and Actual Expenditures of the Central Government (Millions of Quetzales) /2
1994                   1995                  1996                   1997                  1998
Budget           %     Budget           %    Budget           %     Budget           %    Budget           %
Sector        Approved Actual Diff. Approved Actual Diff. Approved Actual Diff. Approved Actual Diff. Approved Actual Diff.
Public Debt Management'   469.7   664.6  41.5    864.3  864.3   0.0    1065.8 1065.6   0.0    819.7   812.2  -0.9   1385.4 1360.5  -1.8
Internal                  163.6  455.3 178.3    270.3  594.0 119.8     415.7  650.1  56.4    362.4   456.4  25.9    481.8  885.3  83.7
External                 306.1   209.3 -31.6    594.0  270.3 -54.5     650.1  415.5 -36.1    457.3   355.8 -22.2    903.6  475.2  47.4
Administration and Gen.
Services                  1060.4 1047.5  -1.2   1519.0 1383.0  -9.0    1799.5 1587.3 -11.8   2204.4 2036.8   -7.6   2708.9 2571.2  -5.1
DefenseandPublicOrder     1014.5 1009.0  -0.5   1157.6  1132.1  -2.2   1138.3 1077.9  -5.3   1232.3 1230.5  -0.1    1519.3 1476.3  -2.8
Economic Infrastructure &
Services:                 1330.5 1055.8 -20.6   1553.8 1203.1 -22.6    2448.9 1493.8 -39.0   3003.1 2423.6 -19.3    3466.6 2976.0 -14.2
Roads and Transport      785.7   584.9 -25.6   1072.4  783.0 -27.0    1425.2 1089.7 -23.5     2259  1747.5 -22.6   2351.1 2076.6 -11.7
Communications            53.7    52.5  -2.2     57.9   50.0 -13.6      51.1   44.9 -12.1    275.1   274.9  -0.1    135.3   69.4 -48.7
Energy                    128.7  111.0 -13.8     96.6   88.7  -8.2     139.1  114.2 -17.9    147.6   119.1 -19.3    200.2  188.5  -5.8
Agriculture and Mining   334.0   285.7 -14.5    300.0  255.7 -14.8     299.8  230.5 -23.1    292.3   254.3 -13.0    486.6  414.7 -14.8
Finance, Industry and     28.4    21.7 -23.6     26.9   25.7  -4.5     533.7   14.5 -97.3     29.1   27.8  -4.5     293.4  226.8 -22.7
Other Activities
Social Sectors:          3371.4 3170.6   -6.0   3782.4 3391.7 -10.3   5200.6 3772.9 -27.5    5466.7 5015.0   -8.3   7662.4  7133.1  -6.9
Education                1315.2 1257.7  -4.4   1432.4 1304.2  -9.0    2044.5 1405.0 -31.3   1914.4 1781.6   -6.9   2549.3 2448.7  -3.9
Health and Environment   691.3   664.6  -3.9    780.3   682.1 -12.6   1024.9  642.7 -37.3    966.7   898.9  -7.0   1285.7  1177.9  -8.4
Housing and Urban Dev.   493.7   485.9  -1.6    640.6  575.0 -10.2     861.3  778.7  -9.6   1217.5  1121.6  -7.9   2170.8 1889.6 -13.0
Community Dev. & Social   871.2  762.4 -12.5    929.1   830.4 -10.6   1269.9  946.5 -25.5   1368.1 1212.9 -11.3    1656.6 1616.9  -2.4
Services
Total (incl. Interest)   7246.5 6947.5   -4.1   8877.1 7974.2 -10.2   11653.1 8997.5 -22.8  12726.2 11518.1  -9.5  16742.6 15517.1  -7.3
Total (excl. Interest)   6776.8 6282.9   -7.3   8012.8 7109.9 -11.3   10587.3 7931.9 -25.1  11906.5 10705.9 -10.1  15357.2 14156.6  -7.8
1/ EKcludes capital amortization.                                                            Sources: Direcci6n de Anilisis Fiscal, Ministry of Finance.
2/This new table was included per request of the Ministry of Finance and is only partly consistent with the rest of this Statistical Appendix.


Table 14. Guatemala: Bilateral External Grants, 1998*
(US$ Thousands)
Donor                     Outstanding Balance*                   1998                   Mitch
Countries               Dec./97      Dec./98           Flows      Mitch      Total   (% of total)
TOTAL        76,822       143,120       46,513     19,214     65,727       29.2%
Germany                                    -            4,773        3,900       873      4,773        18.3%
Algeria                                    -              100          50         50        100        50.0%
Argentina                                  -               3            3        -            3         0.0%
Barbados                                   -               3          -            3          3       100.0%
Canada                                    3,194         3,600         406          0        406         0.0%
Santiago de Compostela Community           -             771          700         71        771        9.2%
Korea                                      -              160          80         80        160        50.0%
IBERDROLA Spain                            -             400          200        200        400        50.0%
United States                            41,457        55,737        7,043     7,237     14,280        50.7%
Venezuela's Social Investment Fund         -            9,720        9,720       -        9,720         0.0%
France                                     -            9,345        4,800     4,545      9,345        48.6%
Italy                                     1,670         4,300        1,030     1,600      2,630        60.8%
Japan                                    28,845        36,863        7,764       254      8,018         3.2%
Mexico                                                  3,000        1,500      1,500     3,000        50.0%
Norway                                    1,500         8,100        6,600       -        6,600         0.0%
Poland                                     -              25           10         15         25        60.0%
Andorra's Principality                     -              14            7          7         14        50.0%
Galicia's Autonomous Province              -              185          90         95        185        51.4%
United Kingdom                             -            1,100        1,100       -        1,100         0.0%
Malta                                      -             227          110        117        227        51.5%
Switzerland                                156          1,593       1,400         37      1,437         2.6%
Taiwan                                     -            2,530         -        2,530      2,530       100.0%
* Does not include China, Denmark, Spain, The Netherlands and Sweden because of inconsistencies in the reports.
Data are underestimated due to underreporting by bilateral agencies
Source: SEGEPLAN Reports.


Table 15. Guatemala: Financing of Public Capital Expenditures, 1996-97
(Millions of Quetzales)
1996                                                                                  1997
Total       Local                 External Financing                              Total       Local                    External Financing
Investment   Financing   Total    Bilateral  Multilateral  Donations  Counterpart  Investment  Financing    Total       Bilateral  Multilateral  Donations  Counterpart
TOTAL                                      4484.5      2913.7     775.0       15.3       570.2        84.6       795.8       6044.6      4624.7       887.0        275.7       532.5         56.8       532.8
CENTRAL GOVERNMENT                         2479.6      1757.4     670.1       15.3       570.2        84.6        52.1       4355.8      3423.6       864.9        275.7       532.5         56.9        67.2
Administration & General Services            96.4        34.8      44.4        0.0        35.5         8.9        17.2        142.6       118.8        17.2         17.2         0.0          0.0         6.6
Defense and Public Order                     73.7        73.7       0.0       0.0          0.0         0.0         0.0        132.1       132.1         0.0          0,0         0.0          0.0         0.0
Economic Infrastructure & Services         1212.9       888.5     313.4      14.7        278.9        19.8        11.0       2412.8      1888.2        513.1        85.5       409.5         18.2        11.5
Roads and Transport                        996.2        759.8    232.9       14.7       218.2         0.0         3.5       1662.4      1201.3        454.3        72.5       375.4          6.5         6.8
Communications                               0.1         0.1       0.0        0.0         0.0         0.0         0.0          0.0         0.0         0.0          0.0         0.0          0.0         0.0
Energy                                      54.9        54.7       0.0        0.0         0.0         0.0         0.2        115.3       106.3         9.0          9.0         0.0          0.0         0.0
Agriculture and Mining                     157.8        72.0      78.5       0.0         58.7        19.8         7.3        172.2       117.8        49.8          4.0        34.1         11.7         4.6
Finance, Industry and Others                 4.0          2.0      2.0        0.0         2.0         0.0         0.0        462.9       462.9         0.0          0.0         0.0          0.0         0.0
Social Sectors                             1096.6       760.4     312.3       0.6        255.8        55.9        23.9       1668.3      1284.5       334.6        173.0       123.0         38.6        49.1
Education, Science and Culture             163.3         99.8     63.5        0.0        63.5         0.0         0.0        267.8       146.9        120.9        64.4        53.7          2.8         0.0
Health                                     246.1         18.4    227.7        0.6       171.2        55.9         0.0        390.8       319.3        71.5         25.9        27.5         18.1         0.0
HousingandUrbanDevelopment                 684.2        639.2     21.1        0.0        21.1         0.0        23.9       1009.7       818.4        142.2        82.7        41.9         17.6        49.1
Community Dev. & Social Services             3.0          3.0      0.0        0.0         0.0         0.0         0.0          0.0         0.0         0.0          0.0         0.0          0.0         0.0
NF PUBLIC ENTERPRISES                       828.6         0.0      84.9        0.0         0.0         0.0       743.7        487,7         0.0        22.1          0.0         0.0          0.0       465.6
GUATEL                                     512.3          0.0     52.0       n.a.        n.a.         na.       460.3        352.4         0.0        10.1         n.a.         n.a.        n.a.       342.3
INDE                                       155.3         0.0       9.5       n.a.        n.a.         n.a.      145.8        103.4         0.0        12.0         n.a.         n.a.        n.a.        91.4
EMPAGUA                                     93.1         0.0      23.4       n.a.        n.a.         n.a.       69.7          0.0         0.0         0.0          0.0         0.0          0.0         0.0
Puertos Quetzal & Santo Tomas               64.9         0.0       0.0        0.0         0.0         0.0        64.9         22.0         0.0         0.0          0.0         0.0          0.0        22.0
Others                                       3.0          0.0      0,0        0.0         0.0         0.0         3.0          9.9         0.0          0.0         0.0         0.0          0.0         9.9
RESTOFGENERALGOVERNMENT                    1176.3       1156.3     20.0       0.0          0.0         0.0         0.0       1201.1      1201.1         0.0          0.0         0.0          0.0         0.0
IGSS                                       264.6       264.6       0.0       0.0         0.0          0.0         0.0        53.8         53.8         0.0         0.0          0.0         0.0         0.0
INTECAP                                     43.1        43.1       0.0       0.0         0.0          0.0         0.0        17.8        17.8          0.0         0.0          0.0         0.0          0.0
IRTRA                                       80.6        80.6       0.0       0.0         0.0         0.0          0.0        67.7        67.7          0.0         0.0          0.0         0.0          0.0
University of San Carlos                    24.0        24.0       0.0       0.0         0.0          0.0         0.0        22.9        22.9          0.0         0.0          0.0         0.0          0.0
Other decentralized                        112.0       112.0       0.0       0.0         0.0          0.0         0.0        28.9         28.9         0.0         0.0          0.0         0.0         0.0
Local governments                          652.0       632.0      20.0       n.a.        n.a.        n.a.         0.0      1010.0       1010.0         0.0         n.a.        n.a.         n.a.         0.0
Source: Ministry of Finance


Table 16. Guatemala: Public Fixed Investment (Millions of Quetzales) /1
1995      1996      1997      1998      1999      2000
(actual)  (actual)  (actual)  (actual)  (budget)  (budget)
TOTAL                                              2240.3    2808.1    4136.1    5923.7    5482.4      6677.7
CENTRAL GOVERNMENT                                  1109.1   1292.5    2447.3    4106.3    5482.4      6677.7
Presidency of the Republic                         419.9     363.1     875.3    1650.9    3296.9      4054.0
o/w Social Funds                                   294.1     351.2     789.4    1472.1    1403.8      1651.1
Fondo Nacional para la Paz (FONAPAZ)              92.8     146.1      176.0    591.7     411.1       383.3
Fondo de Inversion Social (FIS)                    35.9     13.5     181.4     366.9     310.1       520.9
Fondo Nac. Conservaci6n Naturaleza (FONACON)       12.6      0.0       0.0       0.0       3.0         3.0
Fondo Solidaridad Desarrollo Comunitario (FSDC)   138.0    174.1     412.1     491.2     642.6       705.0
Fondo Indigena Guatemalteco (FODIGUA)              14.8     17.5      19.9      22.3      30.0        31.9
Fondo Guatemalteco del Medio Ambiehte              0.0       0.0       0.0       0.0       7.0         7.0
Foreign Relations                                    0.3       0.4       0.6       7.8       6.9         3.7
Police and Interior Affairs                         36.8       0.6     117.3      82.3     109.6       84.3
National Defense                                    14.1       15.0     71.4       0.0       0.0         0.0
Public Finances                                     14.9      15.0       3.0       6.5       1.0         0.0
Education                                           39.9      18.9      74.4     147.7     181.3        13.8
o/w Social Funds                                   24.2       9.8      65.0      92.9     122.0         0.0
Fondo Educacion Rural Coparticipativa (FERC)      24.2       9.8      65.0      92.9     122.0        0.0
Health and Labor                                    27.2      80.3      69.5       3.7       3.0         5.3
Economy                                              11.9      6.4      73.0     246.4       9.3       299.3
o/w Social Funds                                    9.1        1.2     71.6     245.2       6.5      295.3
Fondo Guatemalteco pro Vivienda (FOGUAVI)         9.1        1.2     67.1     245.2       0.0       295.3
Fondo de Ciencia y Teenologia (FONACYT)           0.0       0.0       4.5       0.0       6.5         0.0
Agriculture                                         73.7      57.7      84.3     154.1     283.7       327.3
o/w Social Funds                                   68.4      50.0      45.0      78.6     145.2      108.2
Fondo Nacional Agropecuario (FONAGRO)             41.4      12.5       7.2      21.1      39.3        0.0
Fondo Nacional de Tierras (FONATIERRA)            27.0      37.5      37.8      57.5     105.9      108.2
Communications, Transport and Public Works         468.9     731.4    1048.5    1767.6    1539.9      1819.3
Energy and Mining                                    0.4       0.6      18.3       5.8       7.2         9.0
Culture and Sports                                   0.1       3.0      10.3      32.8      43.5        61.6
Office of Procurement                                 1.1      0.1        1.4      0.9       0.0         0.0
NONFINANCIAL PUBLIC ENTERPRISES                     471.3     728.0     487.7     547.6       n.a         n.a
GUATEL                                             261.0     379.2     352.4     395.7       n.a        n.a
INDE                                                78.0      82.7     103.4     116.1       n.a        n.a
EGGSA                                               70.9     147.0      n.a.      n.a.       n.a        n.a
EMPAGUA                                             21.3      65.0       0.0      n.a.       n.a        n.a
Puertos Quetzal & Santo Tomas                       33.3      40.8      22.0      24.7       n.a        n.a
Others                                               6.8      13.3       9.9      11.1       n.a        n.a
REST OF GENERAL GOVERNMENT                          659.9     787.6    1201.1    1269.7       n.a         n.a
IGSS                                                41.4       9.6      53.8       n.a       n.a        n.a
INTECAP                                              8.3      43.1      17.8       n.a       n.a        n.a
IRTRA                                               28.0      70.6      67.7       n.a       n.a        n.a
University of San Carlos                            20.1      22.7      22.9      11.2       n.a        n.a
Other decentralized                                 39.8      62.6      28.9       n.a       n.a        n.a
Local governments                                  522.3     579.0    1010.0    1258.5       n.a        n.a
o/w Transfers from Central Governmente           497.8     563.5     906.0    1215.9       n.a         n.a
Memo: Total Social Funds                            395.8     412.2     971.0    1888.7    1677.6      2054.6
Includes capital transfers to Social Funds. Does not include any budget expansion or cut.  Source: Ministry of Finance.
2 Resources aimed for municipal works.


Table 17. Guatemala: Composition of Public Fixed Investment (%) /I
1995      1996      1997      1998      1999      2000
(actual)  (actual)  (actual)  (actual)  (budget)  (budget)
TOTAL                                                100.0    100.0     100.0     100.0     100.0      100.0
CENTRAL GOVERNMENT                                   49.5      46.0      59.2      69.3     100.0      100.0
Presidency of the Republic                          18.7      12.9      21.2      27.9      60.1       60.7
o/w Social Funds                                   13.1      12.5      19.1      24.9      25.6       24.7
Fondo Nacional para la Paz (FONAPAZ)               4.1       5.2       4.3      10.0       7.5         5.7
Fondo de Inversion Social (FIS)                     1.6      0.5       4.4       6.2       5.7         7.8
Fondo Nac. Conservaci6n Naturaleza (FONACON)       0.6       0.0       0.0       0.0       0.1         0.0
Fondo Solidaridad Desarrollo Comunitario (FSDC)    6.2       6.2      10.0       8.3      11.7        10.6
Fondo Indigena Guatemalteco (FODIGUA)              0.7       0.6       0.5       0.4       0.5         0.5
Fondo Guatemalteco del Medio Ambienite             0.0       0.0       0.0       0.0       0.1         0.1
Foreign Relations                                    0.0       0.0       0.0       0.1       0.1         0.1
Police Administration                                 1.6      0.0       2.8       1.4       2.0         1.3
Defense                                              0.6       0.5       1.7       0.0       0.0         0.0
Public Finances                                      0.7       0.5       0.1       0.1       0.0         0.0
Education                                            1.8       0.7       1.8       2.5       3.3         0.2
o/w Social Funds                                    1.1       0.3       1.6       1.6       2.2         0.0
Fondo Educacion Rural Coparticipativa (FERC)       1.1       0.3       1.6       1.6       2.2        0.0
Health and Labor                                      1.2      2.9       1.7       0.1       0.1         0.1
Economy                                              0.5       0.2       1.8       4.2       0.2         4.5
olw Social Funds                                    0.4       0.0       1.7       4.1       0.1         4.4
Fondo Guatemalteco pro Vivienda (FOGUAVI)         0.4       0.0       1.6       4.1       0.0         4.4
Fondo de Ciencia y Tecnologia (FONACYT)           0.0       0.0       0.1       0.0       0.1         0.0
Agriculture                                          3.3       2.1       2.0       2.6       5.2         4.9
olw Social Funds                                    3.1        1.8      1.1       1.3       2.6         1.6
Fondo Nacional Agropecuario (FONAGRO)              1.8       0.4       0.2       0.4       0.7        0.0
Fondo Nacional de Tierras (FONATIERRA)             1.2       1.3       0.9       1.0       1.9        1.6
Communications, Transport and Public Works          20.9      26.0      25.3      29.8      28.1        27.2
Energy and Mining                                    0.0       0.0       0.4       0.1       0.1         0.1
Culture and Sports                                   0.0       0.1       0.3       0.6       0.8         0.9
Office of Procurement                                0.0       0.0       0.0       0.0       0.0         0.0
NONFINANCIAL PUBLIC ENTERPRISES                      21.0      25.9      11.8       9.2       n.a         n.a
GUATEL                                              11.6      13.5       8.5       6.7       n.a        n.a
INDE                                                 3.5       2.9       2.5       2.0       n.a        n.a
EGGSA                                                3.2       5.2      n.a.      n.a.       n.a        n.a
EMPAGUA                                              1.0       2.3       0.0      n.a.       n.a        n.a
Puertos Quetzal & Santo Tomas                        1.5       1.5       0.5       0.4       n.a        n.a
Others                                               0.3       0.5       0.2       0.2       n.a        n.a
REST OF GENERAL GOVERNMENT                           29.5      28.0      29.0      21.4        n.a        n.a
IGSS                                                 1.8       0.3       1.3       n.a       n.a        n.a
INTECAP                                              0.4       1.5       0.4       n.a       n.a        n.a
IRTRA                                                1.2       2.5       1.6       n.a       n.a        n.a
University of San Carlos                             0.9       0.8       0.6       0.2       n.a        n.a
Other decentralized                                  1.8       2.2       0.7       n.a       n.a        n.a
Local governments                                   23.3      20.6      24.4      21.2       n.a        n.a
o/w Transfers from Central Government              22.2      20.1      21.9      20.5       n.a        n.a
Memo: Total Social Funds                              17.7     14.7      23.5      31.9      30.6        30.8
Includes all transfers to Social Funds. Does not include any budget expansion.
2 Resources aimed for municipal works.                                          Source: Statistical Appendix, Table 16.


Table 18. Guatemala: Level of Public Fixed Investment (% of GDP) /1
1995      1996      1997      1998      1999      2000
(actual)  (actual)  (actual)  (actual)  (budget)  (budget)
TOTAL                                                 2.6       2.9       3.8       4.9       4.1         4.6
CENTRAL GOVERNMENT                                     1.3      1.4       2.3       3.4       4.1         4.6
Presidency of the Republic                           0.5       0.4        0.8      1.4       2.5         2.8
o/w Social Funds                                     0.3        0.4       0.7       1.2      1.0         1.1
Fondo Nacional para la Paz (FONAPAZ)                0.1      0.2       0.2       0.5       0.3         0.3
Fondo de Inversion Social (FIS)                     0.0      0.0        0.2      0.3       0.2         0.4
Fondo Nac. Conservaci6n Naturaleza (FONACON)        0.0      0.0        0.0      0.0       0.0         0.0
Fondo Solidaridad Desarrollo Comunitario (FSDC)     0.2      0.2       0.4       0.4       0.5         0.5
Fondo Indigena Guatemalteco (FODIGUA)               0.0      0.0        0.0      0.0       0.0         0.0
Fondo Guatemalteco del Medio Ambiente               0.0      0.0       0.0       0.0       0.0         0.0
Foreign Relations                                    0.0       0.0       0.0       0.0       0.0         0.0
Police and Interior Affairs                          0.0       0.0       0.1       0.1       0.1         0.1
National Defense                                      0.0       0.0      0.1       0.0       0.0         0.0
Public Finances                                      0.0       0.0       0.0       0.0       0.0         0.0
Education                                            0.0       0.0       0.1       0.1       0.1         0.0
olw Social Funds                                    0.0       0.0       0.1       0.1       0.1         0.0
Fondo Educacion Rural Coparticipativa (FERC)       0.0       0.0       0.1       0.1       0.1        0.0
Health and Labor                                     0.0       0.1       0.1       0.0       0.0         0.0
Economy                                              0.0       0.0       0.1       0.2       0.0         0.2
o/w Social Funds                                    0.0        0.0      0.1       0.2       0.0         0.2
Fondo Guatemalteco pro Vivienda (FOGUAVI)         0.0       0.0       0.1       0.2       0.0         0.2
Fondo de Ciencia y Tecnologia (FONACYT)            0.0      0.0        0.0      0.0       0.0         0.0
Agriculture                                          0.1       0.1       0.1       0.1       0.2         0.2
olw Social Funds                                     0.1      0.1       0.0       0.1       0.1         0.1
Fondo Nacional Agropecuario (FONAGRO)              0.0       0.0       0.0       0.0       0.0        0.0
Fondo Nacional de Tierras (FONATIERRA)             0.0       0.0       0.0       0.0       0.1        0.1
Communications, Transport and Public Works           0.6       0.8        1.0      1.5       1.2         1.2
Energy and Mining                                    0.0       0.0       0.0       0.0       0.0         0.0
Culture and Sports                                   0.0       0.0        0.0      0.0      0.0         0.0
Office of Procurement                                0.0       0.0       0.0       0.0       0.0         0.0
NONFINANCIAL PUBLIC ENTERPRISES                        0.6      0.8       0.5       0.5        n.a        n.a
GUATEL                                               0.3       0.4       0.3       0.3       n.a        n.a
INDE                                                 0.1       0.1       0.1       0.1       n.a        n.a
EGGSA                                                0.1       0.2       n.a.      n.a.      n.a        n.a
EMPAGUA                                              0.0       0.1       0.0       n.a.      n.a        n.a
Puertos Quetzal & Santo Tomas                        0.0       0.0       0.0       0.0       n.a        n.a
Others                                               0.0       0.0       0.0       0.0       n.a        n.a
REST OF GENERAL GOVERNMENT                             0.8      0.8        1.1       1.0       n.a        n.a
IGSS                                                 0.0       0.0       0.0       n.a       n.a        n.a
INTECAP                                              0.0       0.0       0.0       n.a       n.a        n.a
IRTRA                                                0.0       0.1       0.1       n.a       n.a        n.a
University of San Carlos                             0.0       0.0       0.0       0.0       n.a        n.a
Other decentralized                                  0.0       0.1       0.0       n.a       n.a        n.a
Local governments                                    0.6       0.6       0.9       1.0       n.a        n.a
o/w Transfers from Central Government2              0.6       0.6       0.8       1.0       n.a        n.a
Memo: Total Social Funds                               0.5       0.4       0.9       1.6       1.3        1.4
1 Includes all transfers to Social Funds. Does not include any budget expansion.
2 Resources aimed for municipal works.                                          Source: Statistical Appendix, Table 16.


Table 19. Guatemala: Programmed and Effective Official Disbursements
(Millions of US$)
Deto/reitr1995                                     1996                       1997                        1998 eDs.Rt
Dbo/rdtr      Programmed Effective Disb. Rate Programmed Effective Disb. Rate Programmed Effective Disb. Rate Programmed EffectiveDs.Rt
TOTAL                        300.7   118.7   39.5%       186.4   210.5   112.9%      281.9  323.6   114.8%       245.1   320.2  130.6%
Central Government           281.9   114.5    40.6%      186.4   198.4  106.4%       281.9  323.4   114.7%       245.1   320.2  130.6%
IDB                          72.3   47.3    65.4%       45.7    38.9    85.2%      170.5   101.0    59.3%      134.0   125.6    93.7%
IBRD                         72.0   14.5    20.1%       69.7    68.9    98.8%       17.2    16.5    95.8%       17.3    29.5   170.8%
BCIE                         53.1   37.1    69.9%       41.2    34.0    82.6%       27.5    17.7    64.3%       38.5   112.4   291.9%
FIDA                         5.1     2.7    52.91%       3.4     2.3    67.1%        2.9     2.7    90.4%        2.8     2.5    89.4%
OPEC                          1.6    0.7    43.8%        1.1     0.7    62.8%        5.1     0.5     9.5%       10.0     2.6    26.4%
USAID                        14.6    0.6     4.1%        0.5    17.3                 0.0     0.0                 0.0     0.0
KFW                          11.7    4.3    36.8%        9.8    19.5   199.7%       13.9     9.0    65.0%       20.8     3.5    16.7%
MCC                           8.0    2.0    25.0%        0.0     0.2                 0.0     0.2                 0.0     0.0
FIV - Venezuela              21.2    5.1    24.1%        2.8    12.0    428%        13.9     4.4    31.5%        4.1     1.9    47.4%
Govt. of Switzerland         2.3     0.2     8.7%        0.0     0.0                 0.0     0.0                 0.0     0.4
Eximbank-China               20.0    0.0     0.0%        0.0     0.0                20.0    20.0   100.0%        0.0    40.0
OECF-Japan                   0.0     0.0                12.2     0.0     0.0%       10.8     1.4    13.2%       17.7     1.7     9.8%
Private Creditors (Bonds)    0.0     0.0                 0.0     0.0                 0.0   150.0                 0.0     0.0
USA Government               0.0     0.0                 0.0     4.6    68.867       0.0     0.0                 0.0     0.0
Municipalidad de Guatemala     n.a.   n.a.      n.a.       0.0     4.7                0.0     0.0                 0.0     0.0
GUATEL                        13.8     3.8   27.5%         0.0     7.5                0.0     0.1                 0.0     0.0
OECF-Japan                   12.0    3.8    31.7%        0.0     7.5                 0.0     0.1                 0.0     0.0
BCIE                         1.8     0.0     0.0%        0.0     0.0                 0.0     0.0                 0.0     0.0
EMPAGUA                        5.0     0.4    8.0%        n.a.    n.a.                0.0     0.2                 0.0     0.0
OECF-Japan                   5.0     0.4     8.0%        n.a.    n.a.                0.0     0.2                 0.0     0.0
Source: Ministry of Finance and Bank of Guatemala.
Table 20. Guatemala: Official Disbursements (US$ mn) /1
(Millions of US$)
1987    1988     1989       1990    1991     1992       1993   1994      1995       1996   1997      1998
Bilaterals                    42.8    96.3     31.8       61.6   74.5      59.1      41.3    53.6      48.7      64.2    35.6      50.2
Multilaterals                 27.6   105.1     85.3       68.2    69.7     95.2      28.8    118.3    100.3     144.1   137.8     270.0
Private Creditors             16.4    12.8     43.8       28.1    18.4     36.7       13.5  104.1      61.8       0.0   150.3       0.0
Total Official                86.8   214.2    160.9      157.9   162.6    191.0      83.6   276.0     210.8      208.3  323.6     320.2
1 Data includes disbursements to Bank of Guatemala.
Source: World Bank on data provided by the Ministry of Finance and Bank of Guatemala.


Table 21. Guatemala: Outstanding Public External Debt
(Millions of US$)
1990     1991     1992    1993     1994     1995     1996     1997    19981
Total                          2402.4  2345.1   2281.2   2248.1   2405.9   2347.7   2515.3  2680.9   2774.6
Nonfinancial public sector     1309.2   1315.1  1341.6   1375.3   1627.1   1609.6   1652.9   1926.0  2037.6
Multilateral                   824.1    789.2   763.1    713.4    784.6    807.0    919.1    999.7   1226.3
IDB                          516.7    508.3    497.7   477.9    558.6    570.8    606.0    666.9    777.4
World Bank                   202.0    174.5    172.3   146.3    140.6    123.9    180.9    197.2    203.1
BCIE                         103.1    103.6     86.6     81.5    75.1    100.5    119.7    116.6    227.9
'FAD                           0.7      1.0     3.0      4.2      6.0      7.8      9.1     12.0     13.8
OPEC                           1.6      1.8      3.5     3.5      4.3      4.0      3.4      7.1      4.1
Bilateral                      406.2    437.8   475.4    521.0    554.7    603.0    572.4    524.8    555.9
Commercial Banks                23.0     21.5    31.9     40.6     60.8     59.6     51.0     49.0     49.6
Bonded debt                      0.0      0.0     0.0     40.0     40.3     38.3     39.4    189.4    150.0
Short-term                      55.9    66.6     71.2     60.3    186.7    101.7     71.0    163.1    55.8
CORFINA                         350.3   373.0    387.2    402.1    421.4    437.1    592.4    546.1    581.2
o/w Banco Exterior de Espana    203.3   203.3    188.7    370.9    370.9    370.9    506.4    540.2   576.3
Bank of Guatemala               742.9    657.0   552.4    470.7    357.4    301.0    270.0    208.7    155.9
MLT debt                       474.7    390.4   394.3    368.6    298.0    256.9    239.7    166.0    140.7
Short-term                     268.2    266.6   158.1    102.1     59.4     44.1     30.3     42.8    15.2
Memo: Current GDP              6843.4   9379.1  10128.6  11095.5  13219.3  14336.1  15913.1  17455.2  17687.5
Official external debt/GDP (%)  35.1  25.0     22.5     20.3    18.2     16.4     15.8     15.4     15.7
Source: IMF, Bank of Guatemala and Ministry of Finance.
" 1998 data are preliminary estimates


Table 22. Guatemala: Central Government Outstanding Public Domestic Debt
(Millions of Quetzales)
Balance  Balance   Balance  Balance  Balance  Balance  Balance  Balance   Balance
31/12/90  31/12/91  31/12/92  31/12/93 31/12/94 31/12/95 31/12/96  31/12/97  31/12/98
1. FLOATING DEBT                      580.6    522.3    696.6    1153.1   1075.8   1271.0   661.5     304.1     126.4
PROGRAMA DE FUNCIONAMIENTO            345.0    280.3     432.9    662.1    577.2    530.1   253.1
Organismo Legislativo                  3.2      3.0       5.5     20.0      6.0     4.4
Presidencia de la Republica           58.9     18.7      46.2     57.6     28.0     29.5
Ministerio de Relaciones Exteriores   10.3      6.5       7.8     16.0     28.4     19.8
Ministerio de Gobernacion             11.4      9.1      20.7     36.9     18.8     16.8
Ministerio de la Defensa Nacional     69.3     47.6      55.7     47.6     62.0     24.1
Ministerio de Finanzas Publicas       53.5     33.0      96.8    145.1     87.1     82.9
Ministerio de Educacion               -29.4    30.9      32.1     53.1     96.7    119.7
Ministerio de Salud Publica y A.S.    74.9     76.6     110.4    183.0    164.6    175.6
Ministerio de Trabajo y Prev Soc       0.6      1.0       2.0      7.3      3.2      2.2
Ministerio de Economia                 2.2      0.7       8.9     14.1      4.7      4.6
Ministerio de Agricultura Ganad. Alim.  14.2   13.1      16.3     38.5     38.2     19.6
Ministerio de Comunicaciones T. y O.P.  8.3    14.2      19.6     23.1     22.5     18.0
Ministerio de Energia y Minas          0.5     19.0       1.0      5.6      2.6      1.2
Ministerio de Asuntos Especificos      0.5      0.0       0.0      0.0      0.0      0.0
Ministerio de Cultura y Deportes       2.8      2.6       5.3      6.3      6.6      7.8
Ministerio de Desarollo Urbano y R.    4.3      1.0       1.4      1.4      1.4      0.0
Ministerio Publico                     0.1      0.8       1.1      3.5      0.9      0.0
Procuradoria Gral de la Nacion         0.0      0.0       0.0      0.0      0.9      0.2
Contraloria General de Cuentas         0.6      2.5       2.1      3.0      4.6      3.7
PROGRAMA DE INVERSION                 235.6    242.0     263.7    491.0    498.6    740.9   408.5
Presidencia de la Republica            6.5      1.4       2.9     51.2     64.3    106.8
Ministerio de Relaciones Exteriores    0.1      0.5       1.5      2.5      2.6      0.5
Ministerio de Gobernacion              1.2      0.0       0.0      2.0      2.5     56.1
Ministerio de la Defensa Nacional     11.4     45.6       1.4      4.9      3.2      2.7
Ministerio de Finanzas Publicas      123.5     43.5      62.8    216.6    193.3    261.4
Ministerio de Educacion                2.1     20.9      10.2      8.1     35.3     25.7
Ministerio de Salud Publica y A.S.     3.4      7.5      11.2     25.6     21.9     17.2
Ministerio de Trabajo y Prev Soc       0.0      0.4       0.1      0.0      1.5      1.7
Ministerio de Economia                14.3      4.0       0.0      0.0      7.8     19.5
Ministerio de Agricultura Ganad. Alim.  11.8   26.7      13.3     14.5     23.7     59.6
Ministerio de Comunicaciones T. y O.P.  50.9   83.2     154.3    139.2    133.7    167.7
Ministerio de Energia y Minas          6.7      2.3       0.4      0.4      4.5      0.9
Ministerio de Cultura y Deportes       1.9      4.0       3.4      3.6      2.0     20.6
Ministerio de Desarollo Urbano y R.    1.8      2.0       2.2     16.3      0.1      0.0
Contraloria General de Cuentas         0.0      0.0       0.0      6.1      2.2      0.5
2. BONDED DEBT                       3408.7   3712.6    3684.5   4153.5   4854.7   4485.2  5095.0    5864.9     6259.4
3. CARRYOVER DEBT                       2.2     88.1      51.6     32.2    200.1    241.6     0.0        0.0       0.0
4. CIRCULATNG SECURITIES               0.1      0.2       0.4      0.6      1.0      1.2      1.1       1.1       0.8
5. OTHERS                               1.5      1.8       6.2      6.1      7.9    22.3      0.2       0.0        0.0
TOTAL DOMESTIC PUBLIC DEBT           3993.1   4325.0    4439.3   5345.5   6139.5   6021.3  5757.8     6170.1    6386.6
(as % of GDP)                          11.6      9.1       8.2      8.3      8.2      7.1     6.0       5.7        5.3
Memo: Current GDP                   34316.9  47302.3   53985.4  64243.2  74669.2  85156.7  95478.6  107873.4  121127.3
Source: Ministry of Finance and Bank of Guatemala. 1998 data are preliminary estimates.


Table 23. Guatemala: Central Government Bonded Debt Maturities
(Millions of Quetzales, end of period balances)
1994    1995    1996     1997    1998
1 month            763.4    483.5   289.7   405.8   383.7
2 months             23.2   641.8   373.0   447.6    214.4
3 months            107.5   245.4   396.0   398.9    329.3
4 months             67.0   307.1   271.0   521.9    189.4
5 months            92.7    101.3   154.0   414.7    99.4
6 months            227.2   149.9   235.6   537.8   199.0
7 months            158.0   245.9   457.0   372.0    379.1
8 months            103.6   113.5   314.1   518.1   263.0
9 months            208.8   100.4    99.8   203.2    224.1
10 months          366.4    140.8   134.7   370.0    110.1
11 months           40.8     20.7   113.9    88.2    69.4
12 months          141.8     69.0   130.8   228.8   147.0
13 to 24 months    274.9    179.7  1254.0   850.0   1139.1
25 months +         471.0   330.7    86.8   426.6   2512.7
Subtotal           3046.3  3129.7  4310.4  5783.6   6259.6
Bank of Guatemala  1808.4  1355.5     782    78.4     78.0
Total              4854.7  4485.2  5092.4   5862.0  6337.6
Acumulated Percentual Structure
1 month             25.1     15.4     6.7     7.0     6.1
2 months             25.8    36.0    15.4    14.8     9.6
3 months            29.4     43.8    24.6    21.7    14.8
4 months             31.5    53.6    30.8    30.7     17.8
5 months             34.6    56.8    34.4    37.8    19.4
6 months             42.1    61.6    39.9    47.1    22.6
7 months             47.2    69.5    50.5    53.6    28.7
8 months            50.6     73.1    57.8    62.5    32.9
9 months             57.5    76.3    60.1    66.0    36.4
10 months           69.5     80.8    63.2    72.4    38.2
11 months           70.9     81.5    65.9    74.0    39.3
12 months           75.5     83.7    68.9    77.9    41.7
2 years              84.5    89.4    98.0    92.6    59.9
3 years +           100.0   100.0   100.0   100.0    100.0
Subtotal             62.7    69.8    84.6    98.7    98.8
Bank of Guatemala   37.3     30.2    15.4     1.3     1.2
Total               100.0   100.0   100.0   100.0    100.0
Source: Ministry of Finance


Table 24-A. Guatemala: Savings on Interest Payments from Public Debt Restructuring,
Proposals' Results Comparison
RESULTS               1999    2000    2001    2002    2003       SUM
A. Interest Payments Savings    97    204.0   183.6   163.2    127.0      774.8
1. Proposal 1                 0.1%    0.1%    0.1%     0.1%    0.1%
(as % of GDP)                 185.8   340.0   306.0   272.0    235.8     1339.6
2. Proposal 2                 0.1%    0.2%    0.2%     0.2%    0.1%
(as % of GDP)
B. Intervention Costs
1. Proposal 1                   99    152.4    97.8    33.4     5.1       387.7
(as % of GDP)                 0.1%    0.1%    0.1%     0.0%    0.0%
2. Proposal 2                 177.4   254.5   155.9     51.2     7.3      646.3
(as % of GDP)                 0.1%    0.2%    0.1%     0.0%    0.0%
C. Net Effect
1. Proposal 1                  -2.0    51.6    85.8   129.8    121.8      386.9
(as % of GDP)                 0.0%    0.0%    0.1%     0.1%    0.1%
2. Proposal 2                   8.4    85.5   150.1   220.8    228.5      693.2
(as % of GDP)                 0.0%    0.1%    0.1%     0.1%    0.1%
Source: Statistical Annex Table 24-B, Funes 99.


Table 24-B. Guatemala: Savings on Interest Payments from Public Debt Reestructuring (millions of quetzales)
1999                    2000                     2001                    2002                     2003                  1999-2003
Scenarios                     Description                     Interest   Principal   Interest  Principal     Interest   Principal     Interest   Principal     Interest     Principal   Interest  Principal
Passive: Withoasing privaaeo psceeds
Balance January 1 (Source: Min.Finanzas)                          6,179.1                  5,617.4                  5,018.2                  4,356.7                  3,623.8
Debt Service (Idem, only principal for 1999)            1,174.0     561 7     1,123.5       5992         903.3       661.5       697.1        732.9          543.6     808.4      4,441.4   3,363 8
(as % of GDP)                                             0.9%       0.4%        0.8%        0.4%         0.5%        0.4%        0.4%         0.4%           0.3%      0.4%
Balance as of December 31                                         5,617.4                  5,018.2                  4,3567                   3,623.8                  2,815.3
Option Na 1: USS15O miliafrom privaiztion proceeds
Effective as of January 30,1999  $ 75 millions
as of July 30,1999     S 75 millions
Balance as of January I                                           6,179.1                  4,597.4                  3,998.2                  3,336.7                  2,603.8               6,179.1
Debt Service                                               97.8      46.8       9195         599.2       719.7       661.5       533.9        732.9          4166      808.4      2,687.5   2,848.9
Use of privatization proceeds (January 30; $75 millions)            510.0                     -                        -                        -                        -                   510.0
New balance                                                       5,622.3                  3,998.2                  3,336.7                  2,603.8                  1,795.3               2,820.2
Debt Service                                              979.2     5149          -           -           -            -           -            -              -                   979.2      514.9
Use of privatization proceeds (July 30; $75 millions)               510.0                     -                        -                        -                        -                    5100
Total Service, including privatization effect           1,0771    1,581.7       919.5       599.2        719.7       661.5       533.9        732.9          416.6     808.4      3,666.7   4,383 8
Balance as of December 31                                         4,5974                   3,998.2                  3,336.7                  2,603.5                  1,795.3               1,795.3
Total Service as % ofGDP                                  0.8%       1.2%l       0.6%        0.4%         0.4%        0.4%        0.3%         0. 4%          0.2%      0.4%
Savings per year -millions of Quetzales                   97.0                  204.0                    183.6                   163.2                       127.0                 774.7
as% of GDP                                    0.1%                  0.1%                     0.1%                     0.1%                       0,1%
Opds Na 2: US$250 HAVAsfiat privishividoe, proceeds
Effective as of January 30,1999  $150 millions
as of July 30,1999     $150 millions
Balance asof January 1                                            6,179.1                  3,917.4                  3,318.2                  2,656.7                  1,923.8               6,179.1
Debt Service                                               97.8      46.8       783.5       599.2        597.3       661.5       425A        732.9          307.8     808.4      2,211.5   2,848.9
Use of privatization proceeds (January 30; $150 millions)         1,020.0                     -                                                 -                        -                  1,020.0
New balance                                                       5,112.3                  3,318.2                  2,636.7                  1,923.8                  1,115.3               2,310.2
Debt Service                                              890.4     514.9         -           --                       -           -            -              -         -         890.4      5149
Use of privatization proceeds (July 30; $150 millions)              680.0                     -                                                 -                        -                   680.0
Total Service, including privatization effect             988.2   2,261.7       783.5       599.2        597.3       661.5       425.1        732.9          307.8     808.4      3,101.9   5,063.8
Balance as of December 31                                         3,917.4                  3,318.2                  2,6567                  1,923.8                  1,115.3               1,115.3
Total Service as% of GDP                                  0 7%       1.7%        0.5%        0.4%         0.4%        04%         0.2%         0.4%           0.2%      0.4%
Savings per year -millions of Quetzales                   185.8                 340.0                   306.0                    272.0                       235.8                1,339.6
as% of GDP                                    0.1%                  0.2%                     0.2%                     0.2%                       0.1%
Source: World Bank staff estiamtes and Funes, 1999
Assamptios
Variables                                 1999                              2000                     2001                     2002                     2003
A. Nominal exchange rate (average)                                  680                                7.00                     7.20                     7.41                     7.62
B. Nominal GDP in quetEales                                      134,846                            149,797                  165,376                  183,237                  202,110
C. Banking system lending interest rate                            19.0%                              20.0%                    18.0%                    16.0%                    15.0%
D. For both scenarios, normal amortization is kept constant as % of GDP.
E. Central Government costs from internal debt eitraordinary payments:
Scenarios                                 1999                  2000                     2001                    2002                        2003                   Sam
A. Option No. 1 1999 /2003
-OMO's average interest rate (Source: IMF)                       14.6%                 20.2%                    18.2%                    16.1%                      15.1%
- Interest payments from OMOs -millions ofQuetzales  1/          99.0                 152.4                     97.8                    33.4                         5.1                 3878
(as % of GDP)                                                    0.1%                  0.1%                    0.1%                     0.0%                        0.0%
B. Option No.2
- OMO's average interest rate (Source IMP)                       14.6%                 20.2%                    18.2%                    16.1%                      15.1%
-Interest payments from OMO's -millions ofQuetzales  1/          177.4                 2545                    155.9                    51.2                         7.3                 646.3
(as % of GDP)                                                    0.1%                  0. 2%                    0.1%                    0.0%                        0. 0%
Nominal net effect =fBudgetary Savins - [intervention's monetary cost
A Option No. 1 - millions of Quetsales                            (2.0)                 516                      85.8                    129.8                      121.8                 386.9
(as% of GDP)                                                   0.0%                  0.0%                     0.1%                     0.1%                       0.1%
B. Option No 2- millions of Quetzales                              8.4                  85.5                    150.1                   220.8                       228.5                 693.2
(as%ofGDP)                                                     0.0%                  0.1%                     0.1%                     0.1%                       0.1%
1/ BoGs Open Market Operations (OMO's) have one year maturity terms and are gradually reduced by 75%, 50% and 25% from the original payment.


Table 25. Guatemala: Social Fund5 Investment in 1997 and 1998, by Sector (Millions of Quetzales)
Administration  Defense and    Housing and   Agriculture and  Roads and                  Health & Social   Education'  Finance, Industry
SOCIAL FUND                  TOTAL      and General    Public Order      Urban         Mining        Transport       Energy         Services     Science and     and Others
Services                    Development                                                                  Culture
1998                      1,888.7          62.9            0.5          422.8          331.5          223.6          180.1          284.4          383.0
Fondo Guatemalteco pro Vivienda (FOGUAVI)      245.2           -              -              -            245.2            -                             -              -
Fondo Nacional para la Paz (FONAPAZ)           591.7           6,2            -            422.8                          59.5            -             45.6           57.6            -
Fondo de Inversion Social (FIS)                366.9          34.5            -              -              5.1           30.5           30.8           88.1           177.9
Fondo Solidaridad Desarrollo Comunitario (FSDC)  491.2         -              0.5            -              2.7          133.5          149.2          1507            54.6            -
Fondo Educ. Rural Coparticípativa (PRONADE)     92.9           -              -              -              -              -              -              -             92.9            -
Fondo Nacional Agropecuario (FONAGRO)           21.1           -              -              -             21.1            -              -              -              -              -
Fondo Indigena Guatemalteco (FODIGUA)           22.3          22.3            -                      -                     -              -              -              -              -
Fondo Nacional de Tierras (FONATIERRA)          57.5           -              -              -             57.5            -              -              -              -
Fondo de Ciencia y Tecnologia (FONACYT)         -              -              -              -              -              -              -              -              -              -
1997                        971.0          35.6            7.2          103.3           71.6          215.8          116.9          181.5          233.5            5.6
Fondo Guatemalteco pro Vivienda (FOGUAVI)       67.1           -              -             67.1            -              -              -              -              -              -
Fondo Nacional para la Paz (FONAPAZ)           176.0          35.6            -             22.6           22.5           22.6            -             50.1           22.6
Fondo de Inversion Social (FIS)                181.4           -              -              -              2.8            4.6           37.8           37.1           93.5            5.6
Fondo Solidaridad Desarrollo Comunitario (FSDC)  412.1         -              7.2           13.6            1.3          188.6           79.1           94.3           28.0            -
Fondo Educ. Rural Coparticipativa (PRONADE)     65.0           -              -              -              -              -              -              -             65.0
Fondo Nacional Agropecuario (FONAGRO)            7.2           -              -              -              7.2            -                      -                     -              -
Fondo Indigena Guatemalteco (FODIGUA)           19.9           -              -              -              -              -              -              -              19.9           -
Fondo Nacional de Tierras (FONATIERRA)          37.8           -              -              -             37.8                   -                      -              -              -
Fondo de Ciencia y Tecnologia (FONACYT)          4.5           -              -              -              -              -              -              -              4.5            -
Source: Direccion Tecnica de Presupuesto, Minisoy of Finance


Table 26. Guatemala: Regression estimates of the Social Investment Fund (FIS) and Municipal focalization on Poverty for 1997
Investment *  As % of      Correlation    Determination       Statistic   t Statistic 5%     # of
Objectives                (in MM QZ$)     Total      Coeffic              fici        Independent     significance  observations
Variable
1. FIS Investment by Department
1.1 FIS Investment versus NBI by department  136.30       100%         61.60%          37.94%             3.5            2.09           22
1.2 FIS investment in water projects versus
Water NBI                                  6.03       4.42%        22.79%            5.19%            1.05            2.09           22
1.3 FIS investment in sanitation projects versus
NBl of sanitary services                  10.66       7.82%        -19.67%           3.87%            -0.9            2.09           22
1.4 FIS investment in education projects versus
educational NBI                           82.46      60.50%        69.17%           47.84%            4.28            2.09           22
2. FIS Investment by Municipality
2.1 FIS Investment versus NBI by municipality  136.30     100%         21.66%           53.54%           3.82            1.96           298
2.2 FIS investment in water projects versus
Water NBI                                 6.03        4.42%         12.30/6         1.51%            2.13            1.96          298
2.3 FIS investment in sanitation projects versus
NBI of sanitary services                  10.66       7.82%         -7.55%           0.57%            -1.3            1.96          298
2.4 FIS investment in education projects versus
educational NBI                           82.46      60.50%         11.71%           1.37%            2.03            1.96          298
3. Municipal Capital Expendture 289 municiaties)
3.1 Municipal Investment versus
municipal NBI                             902.08      100%         -17.26%           2.98%            -2.97           1.96          289
Includes only investment from municipalities where information was obtained.                                                Source: Chocano 1999b


Table 27. Guatemala: Total Expenditure of Central Government by Region (Millions of Quetzales)
1995         1996        1997        1998         1999 2      2000 2
Region            Actual      Actual       Actual      Actual       Budget      Budget
1- Metropolitan             4567.0       2965.6      2906.4       4262.2      4315.0       5375.0
II- North                     208.4       199.0        278.9       415.0        467.5       673.5
III- North-East               356.2        388.6       630.1        738.0        647.1       855.0
IV- South-East                267.3        335.3       418.3        517.3        482.7       616.4
V- Central                    365.3       498.9        525.3        622.9       610.7        787.2
VI- South-West                616.8        795.2       1101.2      1198.6       1125.5       1518.4
VIl- North-West                382.3        352.6       457.4        626.4       780.6        976.2
VIII- El Pet6n                  199.4       225.9        216.5       431.6        425.4        406.0
IX- Mutiregional                -         1907.0       4074.2      5191.1       6550.6      7843.1
Foreign Services             -            -           -           66.8        59.5         87.3
Public Debt Management'        1839.3      2266.9       1629.9       1704.7      1815.4       2680.8
Internal                   594.0        650.1       456.4        885.3       707.8       1089.1
External                   451.0        478.2       369.6        475.2       807.5       1088.7
BOG losses                 794.3       1138.6       803.9        344.2       300.0        503.0
Total                          8801.9       9935.1     12238.2      15774.6      17280.1     21818.9
i Excludes capital amortization.
2 In 1997 a new system for government financial management was introduced. To ensure comparability, the Staff
reclassified figures for 1998 and 1999 that are compatible with the old series. IMF and IFMS staff are working together
to reclassified historical data according to the new budget classification. Does not include any budget expansion.
Table 28. Guatemala: Total Expenditure of Central Government by Region (as % of Total)
1995         1996        1997         1998        1999         2000
Region            Actual      Actual       Actual      Actual       Budget      Budget
I- Metropolitan               51.9         29.8        23.7         27.0        25.0         24.6
II- North                       2.4         2.0          2.3         2.6          2.7          3.1
III- North-East                 4.0          3.9         5.1          4.7          3.7         3.9
IV- South-East                  3.0          3.4          3.4         3.3          2.8         2.8
V- Central                      4.1         5.0          4.3          3.9         3.5          3.6
VI- South-West                  7.0          8.0          9.0         7.6          6.5         7.0
VII- North-East                  4.3          3.5         3.7          4.0         4.5          4.5
VIII- El Petdn                    2.3         2.3          1.8         2.7          2.5          1.9
IX- Mutiregional                -           19.2         33.3        32.9         37.9         35.9
Foreign Services             -            -           -            0.4          0.3         0.4
Public Debt Management'          20.9         22.8        13.3         10.8         10.5        12.3
Internal                     6.7          6.5         3.7          5.6         4.1          5.0
External                     5.1          4.8         3.0          3.0          4.7         5.0
BOG losses                   9.0         11.5         6.6          2.2          1.7         2.3
Total                           100.0        100.0       100.0        100.0        100.0       100.0
Sources: Ministry of Finance and Bank of Guatemala


Table 29. Guatemala: 1998 Mitch Reconstruction, 1999 Budget Allocations and Actual Transfers
(Millions of Quetzales)
1998         1999       1998-99       Actual
Entity               Actual       Budget       Total      Transfers*
Autoridad Rescate Amatitldn         5.0           -           5.0         18.0
CONRED                              8.2           -           8.2           -
FIS                                32.2         99.5        131.7        131.5
FONAPAZ                            10.0         57.5         67.5         56.1
INFOM                                -         160.0        160.0           -
MAGA                               34.7         45.0         79.7         26.6
MCTOPV                             12.0         20.0         32.0        160.0
Ministry of Culture and Sports      0.7          1.0          1.7          1.8
MINEDUC                            40.0         25.7         65.7         65.6
MSPAS                              13.4         28.0         41.4         25.7
Ministry of Defense                19.3           -          19.3           -
Ministry of Labor                   0.9          6.5          7.4           -
Social Welfare Secretariat          0.7           -           0.7           -
Executive Coordination Secretariat  10.9        89.0         99.9        150.0
SINAFIP                              -            -            -           2.0
TOTAL                             188.1        532.2        720.4        637.3
* Up to February 12, 1999.                                    Source: Schneider (1999)
Table 30. Guatemala: Mitch Reconstruction Program Portfolio, by Executing Unit
(As of February 12, 1999. Millions of Quetzales)
Number                    Budget      Execution   Actual as %
Executing Unit            of Projects               Approved      Actual      of Budget
FIS                                 202                      82.8         34.7         41.9
FONAPAZ                             298                      31.0         11.5         37.1
INDE                                 20                      26.8         26.8        100.0
INFOM                               552                      29.1         10.6         36.4
IGN                                   1                       3.3           -            -
MAGA                                194                      25.2          9.1         36.1
MCTOPV                              174                     323.7        322.4         99.6
Ministry of Culture and Sports        2                       1.2           -            -
Ministry of Defense                   2                      69.5           -            -
MSPAS                                10                      74.1          0.3          0.4
Ministry of Labor                     1                      12.1           -            -
Executive Coordination Secretariat  225                     112.5         25.4         22.6
TOTAL                              1681                     791.3        440.8         55.7
Source: Schneider (1999)
Table 31. Guatemala: Mitch Reconstruction Program Portfolio, by Project Type
(As of February 12,1999. Millions of Quetzales)
Number                    Budget      Execution   Actual as %
Sector                    of Projects               Approved       Actual     of Budget
Productive Activity                 194                      25.2          9.1         36.1
Water Supply and Sanitation         617                      34.5         12.5         36.2
Energy                               20                      26.8         26.8        100.0
Infrastructure: Education            96                      16.4          4.9         29.9
Infrastructure: Transport           436                     519.4         375.50         -
Health                               12                      75.0          0.4          0.5
Food Supply                         101                       3.9          1.3         33.3
Housing                              98                      25.3          10.10         -
Other                               107                      64.8           -            -
TOTAL                              1681                     791.3        440.6         55.7
Source: Schneider (1999)


Table 32. Guatemala: Budgeted Permanent Positions as reported by DTP and ONSEC, 1995-1998
1995                  1996                 1997                  1998
Ministry        DTP       ONSEC       DTP      ONSEC        DTP      ONSEC       DTP       ONSEC
Presidency           3017.0     2996.0     2996.0    2647.0      266.0      295.0      257.0      348.0
External Relations    551.0      554.0      564.0      523.0     522.0      523.0      523.0      527.0
Governance          17932.0    18713.0    12718.0   24702.0    19019.0    24702.0    24702.0    24662.0
Public Finance       4249.0     3619.0     3621.0    3205.0     3220.0     3214.0     3214.0     3489.0
Education           71839.0    77301.0    77301.0   82321.0    79772.0    83820.0    83236.0    87928.0
Health              20465.0    21066.0    21067.0   20663.0    20964.0    20634.0    20597.0    20815.0
Labor                 674.0      631.0      631.0     616.0      554.0      615.0      615.0      691.0
Economy               301.0      298.0      302.0     222.0      237.0      204.0      204.0      193.0
Agriculture          5687.0     4633.0     4643.0    3883.0     3870.0     3126.0     3108.0     2802.0
Communications      12698.0    12725.0    12785.0       9.5     9397.0     8642.0     8500.0    11423.0
Energy and Mines      414.0      313.0      313.0     303.0      303.0      303.0      303.0      373.0
Culture and Sports   1016.0     1016.0    1016.0     1011.0      960.0     1011.0      961.0     2292.0
TOTAL              138843.0   143865.0   137957.0  140105.5   139084.0   147089.0   146220.0   155543.0
Source: Gregory and Ochoa (1999)
Table 33. Guatemala: Estimated Cost of the Voluntary Retirement Program as of December 31, 1997
(in millions of Quetzales)
Institution                               Estimated Cost
Ministry of Public Finance                    100.0
Ministry of Agriculture                         10.0
Ministry of Communications                     20.0
Ministry of Culture and Sports                  2.0
Ministry of Defense                            60.0
Ministry of Economics                           5.0
Ministry of Education                          10.0
Ministry of Energy and Mines                    0.5
Ministry of Governance                         25.0
Ministry of External Relations                  5.0
Ministry of Health                              7.0
Ministry of Labor                               3.0
National Office of the Civil Service (ONSEC)     1.5
National Institute of Public Administration      1.0
Secretariat for Social Welfare                 10.0
Other Secretariats                              7.5
National Attorney General                        1.0
Secretariat for Economic Planning               5.0
Contingencies                                   16.5
TOTAL                                         290.0
Source: Gregory and Ochoa (1999)


Table 34. Guatemala: Infant Mortality Rate, by Department
(children under one year)
Department                  Per 1,000 live births
Guatemala                         39.9
Progreso                          46.8
Sacatep6quez                      56.2
Chimaltenango                     58.9
Escuintla                         67.9
Santa Rosa                        43.1
Solold                            68.2
Totonicapdn                       84.4
Quetzaltenango                    58.9
Suchitepdquez                     49.4
Retalhuleu                        50.2
San Marcos                        40.5
Huehuetenango                     37.2
El Quich6                         49.3
Baja Verapdz                      39.9
Alta Verapdz                      28.7
Petdn                             35.5
Izabal                            39.8
Zacapa                            31.8
Chiquimula                        38.5
Jalapa                            34.8
Jutiapa                           31.8
Country Average                   45.5
Source: National Statistics Institute (INE)


Table 35. Guatemala: Estimated Cost of Reducing the Illiteracy Rate by 1 percent
As % of Population                                               Population
1994        1998        1999       2000        2001        2002       2003        2004        2005        2006
Population /1                  8,293,706  10,799,133  11,088,362  11,385,338  11,690,465  12,003,770  12,325,471  12,655,793  12,994,968  13,343,234
Population Growth Rate /2                    30.21       2.68        2.68        2.68        2.68        2.68       2.68        2.68        2.68
Age Group:    15-19                 11.0
20-24                   8.5
25-29                   6.7
30-34                   6.2
35-39                   5.3
40-44                   4.5
45-49                   3.4
50-54                   2.8
55-59                   2.1
60-64                   2.0
Total 15-64 Age Group /3            52.5
Population over 15 years /4               5,669,545   5,821,390   5,977,302   6,137,494   6,301,979  6,470,872   6,644,291   6,822,358   7,005,198
Illiterate Population /5                   1,849,600  1,899,137   1,950,001   2,002,261   2,055,922  2,070,901   2,126,401   2,183,389   2,241,904
Illiteracy Rate /6                            32.62       32.62      32.62       32.62       32.62       32.00       32.00       32.00      32.00
CONALFA's capacity to reduce illiteracy rate /7          75,240     78,000      81,000      84,000      88,000      92,000      96,000    100,000
(assuming a 40% promotion rate)                                     153,240    234,240     318,240     406,240     498,240     594,240    694,240
Illiterate Population minus CONALFA's reduction /8    1,823,897   1,796,761   1,768,021   1,737,682   1,664,661  1,628,161   1,589,149   1,547,664
Expected Illiteracy Rate /9                               31.33       30.06      28.81       27.57       25.73       24.50       23.29      22.09
Cost of reducing the Illiteracy rate in 1999 Quetzales /10  37,379,232  38,750,400  40,240,800  41,731,200  43,718,400  45,705,600  47,692,800  49,680,000
CONALFA's budget /11                                 83,060,000
Cost of reducing the Illiteracy rate by 1% (in Q) /12            30,511,699
Cost of reducing the Illiteracy rate by 1% (in US$) /13           4,358,852
Footnotes:                                                                                                                   Source: Anderson (1999)
/1 INE's population growth rate used in projections.
/2 Based on INE's data for 1997-2000.
/3 Percentage of population within the 15-64 age group, based on 1994 Census. Target population of CONALFA's Literacy Program.
/4 Estimated using the 1994 Census proportion (52.5%)
/5 1998 source is CONALFA. For future years, the illiteracy rate is kept constant if no intervention happens to improve the quality and coverage of primary education.
/6 Illiterate population as % of population over 15 years of age.
/7 1998 source is CONALFA. For future years, CONALFA's capacity to reduce illiteracy rate is assumed to improve.
/8 Illiterate Population from line 5, minus CONALFA's cumulated reduction in line 7.
/9 Illiterate population as % of population over 15 years of age (line 4).
/10 Calculated by multiplying the marginal cost of educating one individual (Q468 in 1998, adjusted for inflation) by the number of people educated in a given year (line 7).
/11 Budget approved by the Congress (reported by CIEN). Presented as reference. Its magnitude could indicated a greater budget availability to educate a greater number
of persons, a under estimation of the marginal cost of educating one individual, or the partial allocation of these resources to other programs.
/12 Based on 61,417 educated persons (78,000 educated persons / difference between the illiteracy rate of 1999 and 2000).
/13 Exchange rate US$1 = Q7.


Table 36. Guatemala: Education Indicators, Projections and Estimated Cost of Increasing the Gross Primary Enrollment Rate by 1 percent
1997        1998          1999         2000         2001        2002        2003         2004
1/ Population within the 7-12 age group                        1,751,775   1,805,003     1,844,905    1,886,380     1,928,788   1,980,634  2,033,913    2,088,523
2/ Population enrolled with the MINEDUC (2. + 5,1)             1,544,709   1,605,490    1,679,043     1,740,320    1,815,320   1,890,320    1,965,320  2,040,320
3/ Population (7-12) not served by the MINEDUC (1-2)             207,066     199,513       165,862       146,060      113,468      90,314      68,593      48,203
4/ Drop Outs (2 * 24)                                            125,121     127,444       129,118       132,508      135,278     137,804     140,088     142,129
5/ New individuals integrated to the system (6+7)                             75,603        61,277       75,000        75,000      75,000      75,000      75,000
6/   of which, PRONADE                                                        75,603        61,277        55,000       60,000      60,000      65,000      65,000
7/             Night-time students                                                             -         20,000        15,000      15,000      10,000      10,000
8/ Net population served by the MINEDUC (2+5-4)                 1,419,588   1,553,649    1,611,202     1,682,812    1,755,042   1,827,516   1,900,232    1,973,191
9/ Gross Primary Enrollment Rate (%)  (2/1)                        88.18       88.95         91.01        92.26         94.12       95.44       96.63       97.69
10/ Net Primary Enrollment Rate (%)                                72.59       73.45         75.51        76.76        79.12        80.44       82.13       83.19
11/ Marginal cost of adding one student in PRONADE schools (Q)                                969
12/ Marginal cost of adding one student in traditional schools (Q)                            707
13/ Infrastructure cost derived from the increase of the student population (Q)         79,446,630
14/ Infrastructure cost per student (13 / 6)                                                 2,190
15/ Cost of increasing the enrollment rate by 1%, excluding infrastructure (Q)          28,769,561
16/ Cost of increasing the enrollment rate by 1%, excluding infrastructure (US$)         3,941,036
17/ Cost of increasing the enrollment rate by 1%, including infrastructure (Q) (13+15)  108,216,191
18/ Cost of increasing the enrollment rate by 1%, including infrastructure (US$)        14,824,136
19/ Students not promoted (failing students) (2*23)                                        132,126       127,504      125,610     120,541     114,657     110,728
20/ Cost of failing students (Q)                                                        93,434,514    90,165,499   88,826,160  85,241,426  81,081,028  78,302,530
21/ Cost of failing students (USS)                                                       12,799,248   12,351,438   12,167,967  11,676,908   11,106,990  10,726,374
System's Internal Efficiency Indicators
22/ Average primary promotion rate (%)                             81.91       81.99         84.44         85.06        85.63       86.33       87.04       87.61
23/ Average primary failing rate (%)                               13.57       10.18          7.87         7.33          6.92        6.38        5.83        5.43
24/ Average primary drop out rate (%)                               8.10        7.94          7.69          7.61         7.45        7.29        7.13        6.97
Footnotes:                                                                                                                                  Source: Anderson (1999)
1/ INE's population projections till 2001. Staff estimations for the rest.
2 and 3/ For 1997, data from the original registration (Source: Information Unit, Ministry of Education (MINEDUC). For 1999-04, staff estimations based on prior year enrollment plus
the total amount of new individuals integrated to the system.
4/ It is assumed that these new spaces, available after the drop outs, are used to enroll about 50% of the overage children. The other 50% enrolls through the traditional system.
6/ PRONADEs estimations to enroll new students to the educational system.
7/ MINEDUC estimations to enroll new students through night-time classes. MINEDUC has agreed with the World Bank to enroll 75,000 students annually for five years (1998-02)
8/ Annual enrollment growth, including drop outs.
10/ For 1997, data obtained from MINEDUC (Anuario Estadistico 1997). Staff estimations for the rest.
11/ Anuario Estadistico 1997, adjusted by the inflation rate.
12/ Anuario Estadistico 1997, adjusted by the inflation rate and to include administrative expenses.
13/ Excludes 1999 infrastructure for 25,000 students already built by PRONADE; estimated by multiplying 36,277 new students by the cost of building one classroom with 40 students, Q87,600.
14/ Cost per student=Q79,446,630/(61,277-25,000=36,277 students)=Q2,190.
15/ Estimated using 29,700 students (61,277 new students, divided by the difference between gross enrollment rate of 1998 and 1998).
16/ Exchange rate US$1 = Q7.3
19/ Failing rate (line 23) multiplied by the initial enrollment (line 2).
20/ Non promoted students (line 19) by the marginal cost of adding one student to the traditional school (line 12). This figure is underestimated because it not adjusted for PRONADE's
greater marginal cost (line 11)
22232/ Anuario Estadistico 1997, MINEDUC. For 1998-04, staff estimations assuming an improvement on the internal efficiency of the system.


Table 37. Guatemala: Comparison of Indigenous Population, by Source
Language       94 Census        Indigenous Languages          TZIAN
Official Commission
Kiche'              647,624               647,624                 1,896,007
Main                346,548               346,548                 1,126,959
Kaqchikel           343,038               343,038                 1,032,128
Q'echi'             473,749               473,749                  732,340
Achi                                        15,617                   (*)
Poqomchi'                                  94,714                  266,750
Q'anjob'al                                  75,155                 211,687
Tz'utujil                                  57,080                  160,907
Chuj                                       50,000                   87,489
lxil                                       47,902                  134,599
Poqomam                                    46,515                  130,928
Popti'                                     39,635                   86,266
Ch'orti'                                   27,097                   76,782
Awakateko                                   18,572                  35,485
Akateko                                    40,991                   40,991
Tektiteko                                   4,895                    4,895
Uspanteko                                   12,402                  22,025
Mopan                                        8,500                  13,460
Itza'                                         650                    1,835
Sakapulteko                                 3,033                   43,439
Sipakapense                                 4,409                    6,118
Garifuna                                    2,477                    6,730
Xinka                                         107                      306
Otros(**)           317,131
TOTAL              2,128,094             2,345,093               6,118,126
(*) Linguistically these are Kiche's.
(* *) This is in reference to the 94 census, which specifies 4 languages and the
rest of them as Others.
Source: Comisi6n Paritaria de Educaci6n (1998)


Table 38. Guatemala: Amount of Mayan Language Speakers and Schools,
by Linguistic Community
Language         No. of Speakers      No. of Schools      Ratio of Speakers
to Schools
Awakateko                   35,485                 18                  1,971
Q'anjob'al                 211,687                103                  2,055
Q'eqhi'                    732,340                283                  2,588
Ixil                       134,599                 39                  3,451
K'iche'                  1,986,007                429                  4,629
Popti' (Jakalteko)          86,266                 17                  5,074
Man                      1,126,959                210                  5,366
Kaqchikel                1,032,128                182                  5,671
Achi                        58,000                  9                  6,444
Poqomchi'                  266,750                 40                  6,669
Chuj                        87,489                 12                  7,291
Tz'utujil                  160,907                 19                  8,469
Ch'orti'                    76,782                  8                  9,598
Poqoman                    130,928                  8                 16,366
Sakapulteko                 43,439                NA                   NA
Akateko                     40,991                NA                   NA
Uspanteko                   22,025                NA                   NA
Mopan                       13,460                NA                   NA
Itza'                        1,835                NA                   NA
Garifuna                     6,730                NA                   NA
Sipakapense                  6,118                NA                   NA
Tektiteko (Teko)             4,895                NA                   NA
Xinka                         306                 NA                   NA
Source: Tay Coyoy (1996)


Table 39. Guatemala: Indigenous Population Average Years of Schooling and
Enrollment within the 7-14 Years of Age, by Department
Indigenous     Average School     Enrollment
Department       Population as       Y              7-14 Years
% of Total                           1995
Totonicapdn               97%               1.5             56%
SololA                    94%              2.0              59%
Alta VerapAz              89%               1.0             36%
El Quichd                 85%               1.1             40%
Chimaltenango             80%              2.8              63%
Huehuetenango             66%               1.8             49%
Quetzaltenango            61%               3.4             76%
Baja Verapdz              57%              2.3              59%
Suchitep6quez             56%              2.6              64%
San Marcos                48%               1.9             67%
Sacatep6quez              47%              3.6              70%
Chiquimula                35%               1.7             61%
Jalapa                    33%              2.3              65%
Retalhuleu                31%              2.8              67%
Santa Rosa                26%              3.1              77%
El Petdn                  23%              2.6              60%
Izabal                    23%              2.9              61%
Guatemala                 12%              5.3              79%
Escuintla                 10%              2.7              67%
Jutiapa                   8%               2.6              71%
Zacapa                    3%               3.3              74%
El Progreso                1%              3.2              83%
Source: Ministry of Education. Annual Statistical Education Report, 1996.


Table 40. Guatemala: Net Primary Education Enrollment
by Area, Gender and Percentage of Indigenous Population
Percentage of Mayan Population   Area      Men      Women       Total
Less than 20%                 Urban     81.1%     81.7%      81.4%
Rural     81.5%     74.9%      78.2%
From 20% to 30%              Urban      71.4%     70.7%      71.1%
Rural     70.7%      63.4%     67.1%
From 40% to 59%              Urban      91.0%     82.7%      86.9%
Rural     68.8%      57.4%     63.2%
From 60% to 79%               Urban     83.6%     79.0%      81.3%
Rural     65.1%      55.3%     60.3%
More than 79%                 Urban     85.6%     71.4%      78.6%
Rural     57.4%     42.6%      50.1%
Source: Chesterfield and Rubio (1998)


Table 41. Guatemala: Student to Teacher Ratios by Department
Department              Indicator         Urban       Rural        Total
Guatemala               Total Students     27.7        42.7         30.6
Aged 7-12          27.2        46.7        31.0
Progreso                 Total             35.4        34.8         35.0
Aged 7-12          31.6        33.8        33.2
Sacatep6quez            Total              29.1        32.2        29.8
Aged 7-12          29.3        41.4        32.1
Chimaltenango           Total              36.1        33.8         34.8
Aged 7-12          38.3        41.8        40.3
Escuintla               Total              32.9        36.5         35.0
Aged 7-12          37.4        46.2        42.5
Santa Rosa              Total              33.9        38.9         37.6
Aged 7-12          33.8        39.2        37.7
Solols                  Total              30.0        28.9        29.3
Aged 7-12          34.1        37.5        36.3
Totonicapin             Total              55.1        43.4         45.3
Aged 7-12          38.1        63.1        58.9
Quetzaltenango          Total              33.0        42.4         37.9
Aged 7-12          32.6        46.2        39.6
Suchitel6quez           Total              32.3        42.2         37.3
Aged 7-12          27.9        63.1        45.7
Retalhuleu              Total              29.0        35.8         33.3
Aged 7-12          30.1        43.7        38.8
San Marcos              Total              36.2        49.1        46.0
Aged 7-12          27.7        58.4        51.0
Huehuetenango           Total              38.0        33.6         34.5
Aged 7-12          33.9        54.4        50.0
El Quichd               Total              39.2        33.1         34.2
Aged 7-12          48.4        59.6        57.6
Baja Verapiz            Total              34.7        43.1         40.7
Aged 7-12          40.0        61.8        55.6
Alta Veraptz            Total              34.7         31.5        32.2
Aged 7-12          33.1        53.9        49.0
Pet6n                   Total              32.1        34.7         34.2
Aged 7-12          49.6        38.0        40.5
Izabal                  Total              22.9        37.9         33.1
Aged 7-12          26.7        51.2        43.3
Zacapa                  Total              26.7        44.4         36.5
Aged 7-12          24.2        48.9        37.9
Chiquimula              Total              30.1         46.9        40.1
Aged 7-12          30.7        61.2        48.9
Jalapa                  Total              36.2        44.2         41.5
Aged 7-12          38.4        52.3        47.6
Jutiapa                 Total              32.9        42.2         39.8
Aged 7-12          36.1        44.7        45.1
Country                  Total             30.7        38.6        35.0
Aged 7-12          32.3        49.1        41.6
Source: Anderson (1999)


Table 42. Guatemala: Average Teachers per School,
by Department and Area
Department       Urban     Rural      Total
Guatemala               10.9       5.0       8.0
Progreso                 9.3       2.2       2.7
Sacatep6quez            11.9       4.3       7.8
Chimaltenango           11.7       2.8       3.8
Escuintla               11.1       4.3       5.4
Santa Rosa               8.3       2.7       3.1
Solold                  11.1       3.3       4.1
Totonicapin              8.9       3.4       3.7
Quetzaltenango           9.7       3.8       4.9
Suchitep6quez            9.5       3.4       4.9
Retalhuleu              10.2       4.5       5.4
San Marcos               8.0       2.3       2.7
Huehuetenango            9.4       2.4       2.8
El Quich               10.0       2.1       2.5
Baja Verapiz             9.1       1.8       2.3
Alta VerapAz            11.2       1.8       2.3
Petdn                    9.7       2.0       2.4
Izabal                  10.7       1.8       2.4
Zacapa                  10.1       1.7       2.4
Chiquimula               9.4       1.3       1.8
Jalapa                   8.7       1.9       2.5
Jutiapa                  9.1       2.4       2.8
Country Average         10.2       2.5       3.4
Source: Chesterfield and Rubio (1998)


Table 43. Guatemala: Third Grade Completion Rates in Three Years
by Gender, Department and Area
Department         Area          1991-1993               1992-1994              1993-1995               1994-1996               1995-1997
Boys        Girls       Boys       Girls       Boys        Girls       Boys        Girls      Boys        Girls
Metropolitan Area       Urban      53.3%       54.6%       49.5%      55.8%       52.9%       56.0%       53.5%       59.3%       55.0%      59.7%
Rural                             31.4%       39.8%      234.0%      233.5%      70.6%       81.6%       40.8%       52.6%
Total     53.3%       54.6%       49.4%       55.7%       53.6%      56.7%       53.7%       59.6%       54.8%       59.6%
Guatemala               Urban      52.4%       54.4%       51.2%      54.2%       54.7%       55.5%       54.6%       59.5%      56.3%       61.0%
Total     37.2%       38.3%       34.7%       37.1%      39.2%       39.7%       44.1%       46.0%       45.4%       48.3%
Total     43.2%       44.8%       40.8%       43.8%       44.8%      45.7%       48.0%       51.2%       49.5%       53.2%
El Progreso             Urban      45.4%       48.7%       52.8%      60.1%       45.5%       57.2%       41.9%       58.0%      43.1%       58.3%
Rural     27.7%       33.5%       28.1%       31.4%       30.9%      33.2%       29.6%       35.9%       33.4%       36,3%
Total     30.7%       36.6%       32.2%       37.0%      33.4%       37.7%       31.9%       40.3%       35.3%       40.7%
Sacatep6quez            Urban      52.3%       45.6%       49.5%      45.6%       50.5%       44.7%       51.5%       50.0%      51.7%       50.2%
Rural     39.2%       37.8%       42.2%       42.2%       39.6%      37.6%       31.1%       41.3%       44.5%       46.1%
Total     48.5%       43.3%       47.4%       44.6%      47.2%       42.5%       45.0%       47.3%       49.4%       48.9%
Chimaltenango           Urban      46.9%       43.5%       49.5%      51.0%       49.5%       48.4%       49.7%       45.2%      46.4%       50.0%
Rural     37.5%       32.5%       36.6%       32.2%       39.0%      33.7%       38.4%       35.5%       38.1%       35.0%
Total     41.1%       36.8%       41.2%       38.9%      42.6%       38.9%       42.3%       38.8%       40.9%       40.0%
Escuintla               Urban      38.7%       37.9%       40.2%      43.4%       40.6%       44.4%       41.4%       45.8%      44.7%       45.9%
Rural      27.0%      28.3%       26.3%       27.3%       28.3%      28.5%       29.6%       31.5%       32.3%       33.9%
Total     30.4%       31.2%       30.2%       32.0%       31.7%      33.0%       32.9%       35.5%       35.8%       37.4%
Santa Rosa              Urban      43.6%       44.9%       41.8%      49.4%       41.0%       50.2%       45.6%       48.1%      47.2%       48.7%
Rural     28.1%       30.8%       28.9%      30.41.%      29.9%      31.8%       30.6%       33.3%       29.5%       32.4%
Total     30.8%       33.5%       31.2%       33.6%      31.9%       35.0%       33.3%       35.9%       32.6%       35.3%
Solold                  Urban      38.4%       38.7%       46.6%      43.4%       46.5%       38.9%       41.7%       42.1%      44.1%       44.9%
Rural      33.6%      29.2%       37.2%       30.8%       34.8%      32.0%       35.7%       32.4%       36.5%       33.0%
Total     35.0%       31.8%       39.8%       34.6%      38.1%       34.0%       37.4%       35.3%       38.5%       36.3%
Totonicapin             Urban      43.3%       40.2%       44.2%      46.2%       40.0%       49.5%       50.9%       53.2%      51.0%       46.6%
Rural     36.4%       30.1%       36.6%       31.2%       38.5%      30.6%       37.2%       32.5%       41.4%       36.3%
Total     37.5%       31.7%       37.7%       33.5%      38.6%       33.2%       39.1%       35.0%       42.6%       37.7%
Quetzaltenango          Urban      42.5%       46.6%       45.7%      45.6%       45.7%       53.3%       48.1%       47.8%      44.0%       48.4%
Rural     32.3%       29.1%       29.7%       27.6%       38.3%      30.7%       33.3%       30.4%       33.5%       31.0%
Total     35.6%       34.7%       34.4%       33.1%      39.6%       34.4%       37.7%       35.6%       36.5%       36.2%
Suchitep6quez           Urban      41.8%       42.3%      42.4%       40.2%       41.7%       40.7%       44.2%      42.2%       42.9%       42.1%
Rural     24.9%       20.0%       25.6%       22.7%       25.9%      22.5%       29.0%       26.7%       28.5%       24.5%
Total     31.1%       28.1%       31.5%       28.8%      31.1%       28.6%       34.2%       32.2%       33.4%       30.8%
Retalhuleu              Urban      40.7%       38.9%       41.8%      41.7%       50.1%       50.5%       48.1%       48.8%      45.2%       48.5%
Rural     29.0%       25.9%       29.6%       25.7%       31.3%      29.9%       35.0%       32.8%       36.1%       32.6%
Total     31.6%       29.1%       32.4%       29.3%      35.3%       34.1%       37.8%       36.3%       38.0%       36.2%
Page 1 of 2


Table 43. Guatemala: Third Grade Completion Rates in Three Years
by Gender, Department and Area
Department         Area          1991-1993               1992-1994              1993-1995               1994-1996               1995-1997
Boys        Girls       Boys       Girls       Boys        Girls       Boys        Girls       Boys        Girls
San Marcos              Urban      45.9%       49.6%       49.4%      46.5%       46.1%       48.5%       52.0%       51.1%       47.5%       52.4%
Rural     32.1%       24.5%       30.0%       25.3%       32.1%      27.4%       32.5%       28.1%       33.0%       28.4%
Total     33.9%       27.9%       32.5%       28.3%      33.9%       30.2%       35.0%       31.1%       34.8%       31.5%
Huehuetenango           Urban      46.7%       48.0%       49.9%       51.3%      49.3%       48.5%       47.4%       49.1%       49.9%       49.2%
Rural     36.7%       28.0%       34.9%       29.1%       35.7%      29.4%       37.4%       30.8%       37.3%       31.4%
Total     38.3%       31.4%       37.1%       32.5%      37.8%       32.3%       39.0%       33.7%       39.1%       34.1%
El Quichd               Urban      39.7%       40.0%       42.9%       41.4%      39.2%       42.4%       41.0%       46.0%       46.5%       46.5%
Rural     24.2%       21.2%       23.5%       19.2%       25.2%      20.5%       26.3%       22.4%       26.8%       22.6%
Total     26.7%       24.4%       26.4%       22.6%      27.2%       23.8%       28.5%       26.0%       29.5%       25.9%
Baja Verapiz            Urban      38.4%       35.5%       39.5%       45.3%      40.9%       38.0%       41.8%       43.9%       46.3%       48.4%
Rural      28.6%      25.6%       26.1%       24.3%       28.0%      27.0%       28.6%       27.8%       27.3%       25.2%
Total     30.4%       27.7%       28.6%       28.8%       30.5%      29.1%       31.1%       31.2%       30.8%       29.5%
Alta Verapfz            Urban      40.4%       41.4%       42.2%       39.2%      44.9%       43.3%       47.3%       47.7%       43.8%       44.2%
Rural      24.1%       16.7%      22.1%       17.4%       24.5%       18.4%      21.6%       19.7%       25.0%       20.7%
Total     27.8%       23.3%       26.5%       22.8%      28.3%       23.7%       26.4%       25.4%       28.5%       25.6%
Pet6n                   Urban      40.6%       41.8%       38.3%       45.5%      45.2%       53.1%       53.4%       60.3%       47.4%       54.3%
Rural      26.3%      25.7%       24.9%       25.7%       24.2%      24.2%       23.6%       25.5%       25.2%       25.9%
Total     28.8%       28.7%       27.0%       29.0%      27.1%       28.4%       27.4%       30.2%       28.2%       29.7%
Izabal                  Urban      38.1%       42.3%       41.6%       43.1%      37.6%       49.5%       41.7%       51.0%       44.7%       52.5%
Rural     23.6%       27.9%       21.1%       24.7%       24.7%      26.1%       28.1%       29.0%       26.1%       29.3%
Total     26.1%       30.5%       24.2%       27.7%       26.8%      29.9%       30.3%       32.4%       28.8%       32.7%
Zacapa                  Urban      44.4%       70.2%       45.2%       50.2%      41.6%       53.5%       38.0%       51.8%       43.1%       48.7%
Rural      27.6%      34.4%       26.5%       30.4%       26.7%       31.4%      28.8%       32.2%       29.0%       31.4%
Total     31.3%       42.7%       30.3%       34.7%       29.5%      35.6%       30.7%       36.1%       31.8%       35.1%
Chiquimula              Urban      46.0%       47.8%       46.0%       54.5%      50.9%       52.1%       52.7%       53.7%       55.1%       56.9%
Rural      28.0%      30.6%       21.9%       25.1%       23.0%       28.8%      25.6%       29.5%       25.8%       28.0%
Total     31.1%       33.8%       26.2%       30.5%       27.6%      32.7%       30.0%       33.8%       30.3%       33.3%
Jalapa                  Urban      38.9%       46.9%       42.4%       45.2%      41.2%       44.9%       44.0%       50.8%       43.5%       56.7%
Rural     22.7%       21.0%       23.8%       21.1%       24.7%       22.9%      25.5%       24.0%       24.3%       22.8%
Total     26.0%       26.3%       27.5%       26.0%       27.8%      27.3%       29.1%       29.3%       27.9%       28.9%
Jutiapa                 Urban      48.4%       50.3%       48.2%       52.3%      45.3%       49.3%       44.9%       52.2%       54.7%       53.6%
Rural     32.7%       31.9%       30.7%       30.7%       30.1%       33.2%      31.6%       33.7%       30.1%       32.0%
Total     34.9%       34.5%       33.0%       33.4%       32.0%      35.3%       33.2%       36.1%       33.3%       34.9%
Country                 Urban      46.0%       47.5%       46.5%       48.7%      47.2%       49.2%       48.6%       51.7%       49.2%       52.3%
Rural      30.4%      27.9%       29.0%       27.3%       30.4%       28.5%      31.6%       30.6%       32.2%       30.8%
Total     34.6%       33.6%       33.5%       33.1%       34.7%      34.0%       35.9%       36.1%       36.4%       36.4%
Source: Chesterfield and Rubio (1998)
Page 2 of 2


Table 44. Guatemala: Percentage of Not Promoted and School Drop Outs in 1996 who Returned to School in 1997,
by Gender, Department, Area and Grade
Department       Area           1ST               2ND               3RD                4TH               5TH                6TH
Boys     Girls    Boys      Girls    Boys     Girls    Boys     Girls    Boys      Girls    Boys      Girls
Metropolitan Area    Urban     75.8%    74.1%    73.7%    66.9%     68.7%    63.0%    65.1%    63.6%    48.0%    46.7%     50.4%     46.8%
Rural    98.0%    166.7%   74.1%     80.0%    76.5%    75.0%    32.0%     15.4%    66.7%   300.0%              100.0%
Total    76.3%    75.1%    73.8%     67.1%    68.8%    63.3%    64.3%    62.9%    48.1%     47.4%    50.4%     47.0%
Guatemala            Urban     76.3%    75.0%    76.9%    70.8%    68.4%     59.9%    56.8%    54.1%    48.8%    43.1%     50.6%     45.3%
Rural    70.5%    68.1%    58.5%     49.5%    58.6%    50.5%    50.0%    46.3%     44.6%    37.0%    68.0%     43.2%
Total    72.2%    70.2%    64.7%     56.4%    62.3%    54.0%    53.1%    50.0%    46.4%     39.8%    57.8%     44.3%
El Progreso          Urban     83.2%    82.2%    85.7%    97.2%     87.0%    70.1%    66.4%    57.8%    62.8%    39.6%     46.7%     21.4%
Rural    64.5%    67.9%    66.3%     57.0%    58.5%    57.2%    49.0%    49.7%     46.6%    37.7%    28.6%     24.1%
Total    67.1%    70.2%    70.9%     65.2%    65.5%    60.3%    54.5%    52.6%    50.9%     38.4%    38.5%     22.9%
Sacatep6quez         Urban     71.4%    70.9%    65.3%    58.3%    53.6%     52.8%    55.7%    48.9%    48.7%    57.6%     46.8%     29.2%
Rural    82.0%    72.7%    69.7%     70.0%    82.7%    51.4%    65.3%    36.5%     37.5%    17.4%    133.3%    10.0%
Total    75.0%    71.5%    66.8%     63.0%    61.6%    52.4%    57.9%    45.0%    46.8%     51.1%    68.7%     23.5%
Chimaltenango        Urban     79.4%    80.7%    69.5%    74.0%    63.2%     66.8%    59.7%    42.5%    48.9%    39.6%     37.4%     49.2%
Rural    80.1%    76.6%    69.9%     67.2%    61.7%    55.1%    46.9%    40.6%     29.8%    24.5%    52.2%     25.6%
Total    79.9%    77.7%    69.8%     69.2%    62.2%    59.4%    51.9%    41.4%    38.6%     31.9%    43.2%     39.8%
Escuintla            Urban     86.2%    80.9%    76.3%    72.7%     61.5%    57.8%    52.4%    52.8%    55.4%    41.5%     47.7%     19.4%
Rural    75.8%    77.1%    59.0%     58.1%    55.4%    55.4%    48.3%    38.4%     37.7%    29.3%    54.4%     20.2%
Total    78.2%    78.1%    64.3%    61.9%     57.4%    56.2%    50.0%    44.4%    45.5%     34.0%    51.1%     19.8%
Santa Rosa           Urban     88.2%    93.5%    63.3%    59.3%    65.0%     71.9%    55.2%    41.4%    50.9%    34.0%     27.7%     12.5%
Rural    71.8%    74.4%    59.5%     58.3%    57.8%    55.4%    50.8%    47.7%     38.1%    35.9%    32.0%     23.7%
Total    73.7%    76.5%    60.1%     58.5%    59.1%    58.3%    51.7%    46.00/   41.4%    35.3%    30.6%     19.8%
Sololf               Urban     72.2%    69.1%    74.9%    67.7%    65.7%     65.1%    57.6%    60.7%    55.0%    40.2%     25.9%     40.0%
Rural    76.5%    73.1%    75.6%     74.1%    61.2%    61.3%    48.0%    45.1%     30.5%    34.4%    31.9%     39.0%
Total    75.5%    72.2%    75.4%     72.4%    62.9%    62.3%    51.6%    50.0%    39.2%     36.4%    28.6%     39.3%
Totonicapin          Urban     82.0%    72.0%    54.1%    61.2%    63.2%     85.2%    37.5%    69.4%    54.2%    29.8%     42.1%     31.6%
Rural    63.1%    62.9%    60.5%     57.2%    55.4%    49.8%    48.6%    41.4%     51.9%    30.0%    41.0%     14.7%
Total    65.6%    64.1%    59.8%     57.6%    56.3%    53.3%    46.9%    46.3%    52.3%     29.9%    41.4%     20.8%
Quetzaltenango       Urban     72.9%    71.7%    60.4%    53.6%    55.8%     56.4%    52.1%    46.7%    46.2%    40.0%     56.5%     72.6%
Rural    70.5%    65.4%    61.1%     59.9%    59.6%    48.6%    47.1%    42.4%     42.0%    30.1%    35.6%     15.7%
Total    71.1%    66.9%    60.9%     58.0%    58.2%    51.3%    49.1%    44.2%    43.8%     34.3%    46.6%     44.8%
Suchitep6quez        Urban     80.7%    73.2%    72.9%    65.0%    54.7%     61.8%    61.9%    49.3%    51.1%    50.3%     34.4%     22.7%
Rural    82.1%    77.1%    60.5%     55.6%    50.7%    26.9%    50.5%    31.3%     27.4%    16.5%    28.9%      2.8%
Total    81.6%    75.7%    64.7%     58.6%    52.4%    39.5%    56.3%    40.5%    40.8%     39.0%    32.3%     13.8%
Retalhuleu           Urban     85.1%    73.3%    50.6%    58.9%    68.8%     61.3%    49.7%    47.6%    51.4%    29.4%     70.3%     17.1%
Rural    66.3%    63.0%    57.2%     56.4%    51.5%    39.0%    26.8%    21.0%     34.4%    20.2%    17.5%     42.9%
Total    69.4%    64.9%    55.5%    57.0%     56.1%    44.2%    35.9%    31.7%    41.4%     23.9%    42.9%     26.8%
Page 1 of 2


Table 44. Guatemala: Percentage of Not Promoted and School Drop Outs in 1996 who Returned to School in 1997,
by Gender, Department, Area and Grade
Department       Area           IST               2ND               3RD                4TH               5TH                6TH
Boys     Girls    Boys      Girls    Boys     Girls    Boys     Girls     Boys     Girls    Boys      Girls
San Marcos           Urban     78.1%    75.5%    61.3%    54.9%    83.7%     58.2%    42.0%    40.0%    30.3%    33.8%     36.8%     7.4%
Rural    63.0%    61.9%     55.7%    49.5%    45.1%    39.5%    36.1%     32.4%    34.3%    21.7%    25.1%     18.9%
Total    64.4%    63.1%    56.3%     50.1%    50.7%    42.4%    37.4%    34,1%    33.3%     25.0%    28.0%     15.5%
Huehuetenango        Urban     73.3%    69.5%    71.1%    62.7%    62.5%     55.0%    56.3%    53.8%    36.3%    28.7%     28.8%     27.9%
Rural    71.9%    68.9%     59.9%    55.9%    52.3%    48.7%    37.8%    37.6%     27.3%    24.6%    15.0%     16.5%
Total    72.1%    69.0%     61.4%    56.8%    54.2%    49.8%    41.8%    41.3%     30.0%    25.8%    18.8%     20.3%
El Quich            Urban     71.9%    71.7%    61.6%    60.0%     64.6%    51.3%    52.7%    60.9%    51.1%    70.0%    .41.7%     37.5%
Rural    61.2%    58.1%     49.8%    47.1%    41.1%    47.7%    36.3%     33.3%    30.7%    24.0%    24.0%     15.3%
Total    62.4%    59.5%     51.4%    48.6%    44.9%    48.3%    39.9%    40.3%     36.6%    40.7%    31.3%     24.2%
Baja VerapAz         Urban     68.2%    74.8%    63.3%    72.3%     66.4%    48.6%    69.4%    59.7%    43.9%     51.9%    29.2%     11.1%
Rural    70.2%    63.2%     61.4%    61.9%    51.7%    45.6%    40.5%     31.5%    38.3%    36.0%    29.4%      8.8%
Total    70.0%    64.7%     61.7%    63.5%    55.0%    46.4%    46.3%    40.7%     39.9%    42.5%    29.3%      9.3%
Alta Verapdz         Urban     73.1%    73.1%    63.1%    67.8%    68.3%     59.8%    44.0%    56.5%    33.9%     46.9%    40.4%     22.2%
Rural    57.7%    55.3%     47.0%    44.6%    40.9%    41.8%    31.5%     39.5%    30.1%    38.8%    25.0%     11.4%
Total    59.9%    57.8%     50.1%    49.0%    46.8%    47.0%    35.1%    45.3%     32.0%    42.6%    32.1%     15.7%
Petdn                Urban     90.9%    92.0%    67.1%    69.0%    67.9%     60.0%    63.3%    60.7%    35.5%    48.4%     16.4%     17.9%
Rural    69.6%    68.0%     54.0%    52.1%    58.3%    47.9%    38.5%     36.0%    38.1%    34.2%    27.8%     10.5%
Total    71.4%    70.0%     56.0%    54.3%    59.9%    49.7%    44.2%    41.6%     37.3%    38.8%    23.7%     12.8%
Izabal               Urban     80.4%    87.4%    66.7%    69.7%     58.5%    63.9%    57.2%    51.3%    53.6%    42.1%     27.6%     31.6%
Rural    67.9%    64.6%     61.6%    57.9%    61.4%    48.2%    45.8%    46.8%     40.8%    42.4%    17.5%     22.5%
Total    69.4%    67.1%    62.5%     59.7%    60.8%    51.1%    48.5%    47.9%     44.5%    42.3%    20.7%     25.2%
Zacapa               Urban     70.5%    88.4%    69.7%    59.6%    69.9%     61.7%    70.1%    48.5%    42.3%    34.0%    139.1%    138.5%
Rural    70.5%    69.9%     62.2%    59.6%    63.5%    54.9%    42.6%     54.1%    45.9%    39.2%    39.0%     29.2%
Total    70.5%    72.9%     63.8%    59.6%    65.1%    56.6%    52.0%    52.3%     44.4%    37.9%    75.0%     67.6%
Chiquimula           Urban     84.3%    84.2%    63.7%    58.5%    61.9%     56.8%    51.4%    51.3%    46.2%     49.4%    61.1%     20.8%
Rural    64.8%    65.5%     52.4%    53.3%    46.3%    42.5%    41.9%     37.0%    37.1%    54.7%    25.5%     13.8%
Total    66.8%    67.8%     54.3%    54.1%    50.3%    46.2%    45.1%    42.0%     41.6%    52.5%    39.6%     15.9%
Jalapa               Urban     73.1%    74.2%    72.0%    57.6%     57.3%    64.5%    56.9%    63.0%    41.6%     52.1%    18.5%     40.0%
Rural    68.7%    64.8%     59.8%    57.3%    57.5%    48.9%    43.2%     31.5%    41.8%    29.3%    25.5%     37.0%
Total    69.4%    66.2%     62.2%    57.3%    57.5%    52.8%    47.0%    40.4%     41.7%    40.4%    21.8%     37.5%
Jutiapa              Urban     94.9%    89.7%    68.9%    68.7%    62.5%     75.0%    55.6%    47.8%    38.2%     82.2%    50.00%    50.0%b
Rural    72.2%    71.2%     60.7%    57.6%    58.9%    50.3%    40.4%     35.0%    38.8%    35.6%    42.9%     25.5%
Total    74.3%    73.1%    61.7%     59.2%    59.5%    54.8%    43.3%    37.9%     38.6%    47.2%    44.5%     34.0%
Country              Urban     77.6%    75.9%    68.8%    65.2%    64.8%     60.9%    56.5%    53.6%    46.0%    44.8%     44.3%     39.3%
Rural    68.4%    66.4%     58.3%    55.0%    53.7%    48.0%    42.6%     39.1%    37.2%    32.1%    34.7%     22.0%
____________    Total    70.3%    68.3%     60.8%    57.3%    56.9%    51.8%    47.6%     44.7%    40.8%    37.7%    39.3%     30.1%
Source: Chesterfield and Rubio (1998)
Page 2 of 2