This Systematic Country Diagnostic (SCD)looks at why a country with such great potential has notbeen able to materialize it. The SCD analysis has identifiedseveral knowledge gaps. The analysis in this report focuseson the 2000 to 2014 period, covering the boom years before2008 and the global financial crisis and recovery years upto 2014. It is based on a rich household data set from theNational Living Standards Measurement Survey (ENCOVI) aswell as on data on malnutrition from the 2014 NationalSurvey of Maternal and Child Indicators (ENSMI). Whererelevant and where there are available data, longer timesseries have been constructed, but the focus of the report ison this 15-year period. The analysis has some limitations.The SCD team identified various countries that could beconsidered to be Guatemala’s peer and aspirational countriesin terms of their income level and population size, andwhenever it is relevant to do so, the report benchmarksGuatemala’s performance against the performance of thosecountries. The report is organized as follows: After theoverview presented here in Chapter 1, Chapter 2 providesevidence of the trends in poverty, shared prosperity, andinequality in Guatemala. The first section benchmarksGuatemala’s progress in reducing income poverty against itspeer countries. This is followed by an examination ofconsumption poverty, which is the official measure ofpoverty used in Guatemala. The analysis highlights the gapsbetween the two Guatemalas. The chapter ends with somefindings concerning the drivers of poverty, specificallyfocusing on the roles played by prices, labor, andtransfers. Chapter 3 attempts to answer the question of howinclusive economic growth has been in Guatemala, lookingfirst at the limited role played by labor markets in helpingpeople to rise out of poverty and at the limited humancapital and the dearth of opportunities to increase it. Thechapter then discusses the ineffective and inadequate publicspending that rives these outcomes and demonstrates the linkbetween limited opportunities and poor outcomes, focusingspecifically on malnutrition and vulnerability. Chapter 4analyzes the drivers of growth and the roles andcharacteristics of key sectors. Important changes in tradepolicies are then covered, and the chapter ends with adetailed discussion of the main constraints to increasinginvestment and productivity and to creating high-qualityjobs. Chapter 5 focuses on various fiscal, environmental,and social challenges. Major concerns about tax revenues,water resources and land use are highlighted. The finalchapter summarizes the priorities that have emerged from theanalysis and describes a set of policies or areas of actionthat have the potential to put Guatemala on a path of higherand more inclusive growth.
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