In Guatemala, Will Old Foreign Policies Bring New Results?

The Biden administration remains focused on economic development in Guatemala that will raise GDP, without disrupting the global economics that have contributed to inequality.

August 3, 2021

A photo from the USAID Guatemala archives of Ed Rizzo, Wilburg Jimenez, and Henry A. DuFlon, first Director of Regional Office of Central America and Panama/Alliance for Progress, circa 1960. (USAID Guatemala, Flickr)

For the Biden administration, U.S. policy toward Central America is a centerpiece of its international agenda. Both Biden and Vice President Kamala Harris have stressed the importance of improving economic conditions in Central American countries to reduce the number of migrants heading north to Mexico and the United States. Yet U.S. business interests have traditionally driven U.S. foreign policy, not concern for migrants.

Vice President Harris’ June 6-7 visit to Guatemala was her first international trip in office. Discussing human and drug trafficking, lack of economic opportunities, and corruption, Harris argued that improving the Guatemalan economy was the solution to migration and Guatemalan misery and a key to a hopeful future. To encourage economic growth, Harris said she had met with some of the United States’ “biggest CEOs” to create investment opportunities in Guatemala, “to again uplift folks who may have been overlooked or neglected but also uplift the natural capacity and resources of this beautiful country.”

Harris’ language to promote economic growth might be less about migrants, and more about Guatemala’s strategic importance for the United States. According to the United States Trade Representative, corruption and “Communist China” are the two biggest threats facing U.S. business interests in Guatemala. As China continues its path as Guatemala’s second largest trading partner, and as Central American governments show preference for China, the United States is increasingly concerned. Historically, U.S. policy in Guatemala has focused on stopping the spread of communism by promoting neoliberal economic growth.

The policies Harris announced are nothing new. From the Alliance for Progress under President Kennedy to the Alliance for Prosperity under President Obama, and now once again under Biden, the U.S.-backed solution for poverty in Guatemala has been market-based reforms. The Biden administration seems to be experiencing something between free market amnesia and nostalgia; inequality in Guatemala has not gone away despite years of structural interventions and reforms. The Biden-Harris prescription is unlikely to change these conditions.

Market-led Reforms in Guatemala 

During her visit, Harris announced a public-private coalition called the “Partnership for Central America,” a collaborative effort with multiple transnational corporations to create employment opportunities and encourage Guatemalans to integrate into the digital economy. So far, 12 companies are participating, including Mastercard, Bancolombia, Chobani, Nespresso, Microsoft, and seven other corporations in the finance, food, education, technology, and health sectors.

The new director of USAID Samantha Power also travelled to Guatemala in June. She spoke about the rule of law and the fight against impunity. According to Power, “USAID supports stronger, safer, and more prosperous communities and we seek to provide opportunities to Guatemalans to build their lives at home.”

To contribute to this effort, Power visited CAMPO, a center in the Guatemalan highlands designed to teach farmers to increase yields while adapting to climate change. In a public press conference in Guatemala City, Power announced that USAID was committing $19 million to provide support and promote oversight for Guatemala’s financial management system and help local universities provide employment and foster innovation. She also discussed a $39 million initiative called the “Guatemala Entrepreneurship and Development Innovation Initiative,” which Harris had announced the week before. USAID together with the U.S. private sector will “expand hope and opportunities for all Guatemalans” by providing financial assistance to “entrepreneurs and innovators creating technology-driven, market-led solutions to the conditions forcing people from their communities in Guatemala.”

The Biden Administration recognizes that wealth inequality is a serious problem in Guatemala. Their multi-pronged approach for developing Guatemala’s economy is driven by the market: fight corruption, improve public transparency, create jobs, and stem migration. Corruption, as Power tweeted after her visit, is the main inhibitor of foreign multinational corporations arriving in Guatemala. Public transparency, especially in the domain of finance, is of particular concern to U.S. corporations whose operations have been negatively affected due to corruption in Guatemala. U.S. corporations want to come to Guatemala, as Biden said in 2015, and Harris and Power reiterated this year. And they want to create jobs.

Microsoft is supposed to expand internet access to up to 3 million more Central Americans, create internet connectivity sites, and create digital systems for government fiscal accountability. Mastercard has committed to integrating 5 million Central Americans into the digital economy, including those who live in rural areas with low digital connectivity. In the Entrepreneurship and Development Innovation Initiative, USAID will fund Guatemalan entrepreneurs and environmentally-minded “eco-preneurs” to help create jobs locally. While specific details are unclear, USAID will also likely continue their practice of contracting “partners” to function as intermediaries between USAID and the Guatemalan public, including entrepreneurs. While these practices sound promising, the U.S. neoliberal doctrine has often consolidated wealth in the hands of USAID contractors, further enriched foreign multinational corporations, and driven dispossession. The implementation of these strategies should raise more questions than praise.

A Legacy of U.S. Interference

The United States has long interfered in Guatemala. In the 1950s, democratically-elected President Jacobo Arbenz recognized that a central driver to Guatemalan poverty was unequal land distribution. He proposed agrarian reform as part of a larger suite of market-based solutions to resolve Guatemalan poverty after taking office in 1951. One of the largest landowners in Guatemala at the time was the United Fruit Company (UFCO), a U.S. multinational corporation that owned and operated Guatemalan railroads and ports and controlled large tracts of land. When Arbenz proposed the reform, UFCO urged allies at the CIA to instigate a coup in 1954, removing Arbenz from office and eliminating the threat to their landholdings. After the coup, political conditions in Guatemala deteriorated. In 1960, broad sectors of the Guatemalan public, frustrated by a lack of state reform and faced with mounting state repression, challenged the state’s exclusionary economic and social structures, eventually leading to the start of Guatemala’s Internal Armed Conflict.

The Internal Armed Conflict was one of the bloodiest in the hemisphere. Like other Cold War era conflicts in Latin America, it was conducted under the auspices of the National Security Doctrine, which defined the “internal enemy” first as any communist sympathizer, and later included any person who could become communist. The U.S. government supported Guatemalan military regimes to combat communism. Despite numerous regime changes, the Guatemalan Army did not stray from its purpose to protect the Guatemalan landed elite and the status-quo from the threat of an alternative economic and political order. Violence ensued as popular movements, frustrated by wage stagnation and increasing prices, demanded social, political, and economic reforms. Massacres and enforced disappearances against social movements helped secure Guatemalan and U.S. business interests, protecting private property, monopolizing the means of production, and controlling an inexpensive labor base.

In the early years of the Internal Armed Conflict, USAID proposed an agrarian revolution for Guatemalan farmers. If only small farmers could increase their yields, technocrats argued, then poor Guatemalans would be less likely to join the revolution to fight the systemic causes of their marginalization. Under President Kennedy, the United States supported the creation of the Alliance for Progress. The Alliance was designed to provide over $4 billion in foreign aid to support development initiatives, including efforts to stimulate the productive sector to create job opportunities. The Caribbean Basin Initiative and Washington Consensus, created under Reagan, continued to recognize large disparities between the rich and the poor in Guatemala, and sought to use market solutions—free trade, deregulation, and the creation of infrastructure projects–to connect U.S. businesses to Guatemalan markets and to create conditions for export—led growth in Guatemala.

Between 2013 and 2015, then-Vice President Biden travelled to Guatemala three times promoting a market-based humanitarian approach nearly identical to the arguments used by Harris and Power this year. Biden stressed the importance of the fight against corruption, which he linked to the broader fight against migration, and argued that a more favorable business climate for U.S. corporations would help create employment opportunities for Guatemalans. He also discussed a U.S.-supported plan for development: the Alliance for Prosperity (A4P). According to A4P, fighting corruption, building infrastructure (roads, ports, and airports), and creating job opportunities was the solution to Guatemalan poverty and migration.

Securing Guatemala’s Future

The result of these market reforms has been nearly uniform: since the 1950s, Guatemala’s GDP has grown steadily, with a 2020 reported GDP of $77.6 billion, a 24.8 percent increase from 2015. According to Guatemalan think tank Fundación Para La Libertad y el Desarrollo, in 2021, Guatemala reported a 10 percent increase in economic activity and growth in GDP. However, Guatemala also has some of the greatest wealth disparity in the world. Around half of the population falls under the poverty line. An estimated 85 percent of the population is either poor or at risk of falling into poverty in the case of economic shock. The Biden Administration has not highlighted this problem. Perhaps economic growth is less a problem for Guatemalans than wealth distribution. Just as during the Internal Armed Conflict, the U.S. response seems to be less about resolving wealth disparities than it is about securing a good business climate for U.S. capital.

Both Harris and Power touted public-private partnerships with U.S. and foreign multinational corporations, eager to set up business agreements and provide employment to Guatemalans. This policy is attractive to U.S. corporations that are opened to new markets and inexpensive labor, unencumbered by corruption.

Harris and Power are right: poverty is a problem. Market solutions may seem to address inequality by raising GDP, but without policies that work to move against the monopolization of resources and the subsequent concentration of wealth, they will likely fail to deliver hope. If poverty and inequality are not resolved quickly, the allure of communism may return to Guatemala, posing a renewed existential threat to U.S. multinational business interests.

Christian Pettersen is a doctoral candidate in the Department of Geography at the University of Georgia. His research examines international political economy and rule of law, anti-corruption, and human rights initiatives in Guatemala.

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