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  Number 229 | Agosto 2000
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Guatemala

Fiscal Pact a Major Achievement, Tax Reform Next in Line

Getting Guatemalan business and social representatives and researchers to sit at the same table and hammer out a fiscal pact is an unprecedented achievement. It is in fact the closest thing to a "social pact" the country has ever known. Will the tax reform that comes out of this pact live up to it?

Juan Hernández Pico, SJ

Appearances are deceiving. On Tuesday July 17, the front pages of the country’s two leading newspapers announced that, with only six months passed since President Alfonso Portillo took office, 65% of the Guatemalan people surveyed disapproved of his government’s performance. Considering that Portillo won over 48% of the valid vote in the first round of the presidential elections in November 1999 and an overwhelming 70% in the second round on December 26, this level of disenchantment could be described as "scandalous." Looked at another way, however, more people still believe that this government will turn out better than the last (47%) than the other way around (44.6%). Perhaps it is more appropriate to describe the disenchantment as "guarded." People have not lost all hope and feel that six months is too short a time to write the government off. As a "vender of hopes"—as Portillo defined politicians in a recent televised debate—the Guatemalan President has not failed yet.

Organized crime and the death penalty

June and July were marked by general despair over the country’s inability to deal with organized crime. Kidnappings, bank robberies and lynchings make up a suffocating climate of fear. This again is the legacy of impunity and violence. Public attention focused on the imminent execution of two members of a kidnapping ring known as Los Pasaco, convicted for the kidnapping and murder of an elderly woman in the wealthy Botrán family. Pasaco is a small town in Jutiapa, near El Salvador, and the ring is virtually a clan there. Several of its members belonged to the infamous Judicial Police and served as links between the National Police and military intelligence—people who learned their trade through state terrorism and impunity.
The vast majority of Guatemalans support the death penalty. Retired General Efraín Ríos Montt, president of Congress, said "If you kill, you will die." Pure social vengeance, an eye for an eye. The clever cartoonist Filóchofo, sketching the general in the guise of a vampire, as usual, asked, "Does that include people who’ve committed genocide?" On the other side of the debate, the president of the Landívar University said that opposing the death penalty means making a "much more serious commitment in the fight against crime, working from a much more comprehensive perspective."
In this tense climate, Congress repealed the President’s authority to grant pardons and Portillo sent his mother and other relatives to Canada, since they had apparently received threats from other members of Los Pasaco. Portillo said, "If any member of my family is kidnapped, I will not negotiate." This isn’t fear, it’s prudence. The execution of the two men was televised. According to some surveys, 78% of the population in the capital approved of the execution, but only 22% said they had faith in the justice system.

Fiscal Pact: Latest fruit of the Peace Accords

The first major achievement of the Peace Accords came the very day they were signed, December 29, 1996: an end to the civil war. On February 25, 1999, another crucial step was taken when the Historical Clarification Commission released its report, Guatemala: Memory of Silence, which helped uncover the truth behind the violence and made wise recommendations for rooting it out. The Commission’s report and the National Reconciliation Law form the cornerstone of efforts to establish a rule of law and secure respect for human rights. They also provide an important legal tool for unmasking the most notorious cases of impunity and helping to resolve them through penal actions, reparations, moral condemnation and the formation of new social attitudes. Another important result of the Peace Accords is the work of the Commission to Strengthen Justice, with its mechanisms to follow up on reforms. A new civilian intelligence body is being defined, and an attempt was also made to reform the Constitution, but the reforms were voted down in last year’s referendum. The Fiscal Pact is the most recent result of the Peace Accords, and the first real result of the Socioeconomic Accord.

Fiscal reform tends to be identified solely with taxes and thus is often a seed of contention. But the issue has to do with much more: the very concept of the nation and the function of the state. Getting representatives of the Collective of Social Organizations, economic and political research centers, universities, businesspeople in the business umbrella association known as CACIF and other sectors of society to join in a civic forum and sit down at the negotiating table was a monumental achievement. Getting them actually to agree on a fiscal pact was unprecedented in Guatemalan history. The Commission to Accompany Fulfillment of the Peace Accords deserves recognition for its tenacity and efficiency, uncharacteristic of bureaucratic institutions of its kind.

"No taxation without representation" was the slogan that set fire to the US revolution. It was under this banner that the 13 Atlantic colonies, which were not represented in the British parliament, began to draft their Constitution with its preamble on human rights. This was followed by the Declaration of Independence and the war. It was perfectly clear to the people who established that nation that the state’s mission is to work for the common good and that this means paying taxes, as set by elected representatives. Federalism assured that many taxes would be returned to the people through social spending in their communities.

The situation in Latin America has been quite different. Representative democracy was notably absent from its colonial and post-colonial culture. Taxes were seen as emblematic of state exploitation and tyranny and "political freedom" meant beating them back to a minimum. Very few people enjoyed real citizenship. These conditions were exacerbated in countries where the indigenous population was in the majority. In the "Nation of the Creole" (that is, a person of Spanish descent born in Latin America), as Severo Martínez so aptly described Guatemala, the forced labor and "vagrancy" laws, in effect until the democratic revolution of 1944, gave the state an exceptionally cheap labor force for public works. Furthermore, many of the communications and energy infrastructure projects were consigned to foreign companies, whose goals were not the country’s equitable, sustainable development.

These ideas persist even today. They are patent, for example, in recent remarks by Manuel Ayau, Rector Emeritus of the Francisco Marroquín University, bastion of extreme neoliberalism in Guatemala. In speaking of the fiscal recommendations of the "international bureaucrats," which he disagrees with, Ayau said, "Two things about them impress us: that they are white and foreigners (white creoles don’t impress us, just foreigners)". Of course, Manuel Ayau is an economist and a white creole.

An active, responsible, equitable state

In keeping with the Peace Accords, the fiscal pact recognizes that "the Guatemalan nation is multiethnic, pluricultural and multilingual." In other words, the nation is made up of everyone, not only creoles and mestizos but also Mayans. This may be said today because very important changes have in fact taken place in Guatemala, although not yet enough to marshal a majority of votes in favor of changing the Constitution.

Another point of transcendental importance is that the pact establishes an active, responsible, equitable state. It declares that "the state will ensure the consolidation of a socioeconomic order founded on principles of social justice. It will create the necessary conditions for the national economy to achieve economic and social development and make appropriate use of natural resources and human potential."
After establishing this basis, it explains that "the Fiscal Pact constitutes a national agreement on the amount, origin and destination of resources required by the state to fulfill its functions." Slightly further down, it defines what this means for Guatemala: "Given the vast social differences in the country, the Fiscal Pact involves assuring sufficient resources so the state can help create the conditions needed to allow all Guatemalans to escape from poverty and enjoy the fruits of development." Fortunately, this is not mere populism: "The Fiscal Pact will also contribute to macroeconomic stability by achieving a balance between state income and expenditures." Finally, it takes private initiative and taxpayers in general into account by laying the groundwork for "defining a long-term fiscal policy for the nation, which will reduce uncertainty by setting clear, stable rules."
In the UN Development Program’s most recent Human Development Report, Guatemala fell from 117th to 120th place among the world’s countries. This is no mistake. While the fiscal pact was being discussed, a meningitis epidemic took the lives of 13 children in Quetzaltenango. Guatemala is among the countries in Latin America, along with Brazil and Peru, with the sharpest differences between rich and poor. Vigorous, viable sectors, able to compete in the global market, exist alongside excluded sectors that will not be viable without a change in the status quo.

Fiscal policy: A key tool

The fiscal pact recognizes the productive, redistributive and compensatory nature of fiscal policy. Fiscal policy is the state’s "key tool" in fostering "a comprehensive full employment policy in such a way that it promotes economic efficiency and substantially satisfies Guatemalans’ basic needs and improves their living conditions." It is these two dimensions—economic efficiency and improved social conditions—that often seem beyond reach, at least simultaneously, in underdeveloped countries.

Distancing itself from neoliberalism, which maintains that markets alone will produce public well-being, the fiscal pact affirms that "the fundamental objective of the state is the welfare of human beings" and that "human beings, seen as a material and spiritual whole, must be at the heart of economic and fiscal policy." For well-being to be sustainable, the document continues, "it must be based on the equitable distribution of income, economic, social and political development, full respect for human rights, the identity and rights of indigenous peoples and gender equity." It also mentions the need for the state "to improve the quality of state institutions." It establishes that "harnessing economic resources without discouraging investment is of vital importance to public finances," thus responding to the great fear of private enterprise. It affirms that "a growth rate of no less than 6% annually" will be required for "progressive social policy." Finally, it calls on the international community’s support, "mainly through a greater opening of markets."

1. Fiscal balance without cutting social spending

On this basis, the National Forum for the Fiscal Pact drafted the pact’s principles and commitments in eight chapters. The first chapter deals with the fiscal balance. To deal with this structural pillar of macroeconomic stability, the pact establishes the principle that "fiscal balance will be primarily the result of an increase in tax collection, not a decrease in social spending." This stance is the opposite of the policy imposed on our countries in the 1980s and 90s by the IMF’s structural adjustment programs. The main commitment is to keep the deficit between state income and expenditures on operations and investments to "around 1% of the GDP annually in the period 2001-2003." It also stipulates that income must always surpass administrative expenditures to ensure funding for public investment. The commitment is that this surplus should amount to "no less than 3% of the GDP annually, beginning in 2001."

2. The heart of the issue

The second chapter deals with state income. It touches on the crucial point of the commitment of the state and social organizations to "raise public awareness" about the state’s right to collect taxes and "the civic obligation to contribute to financing public spending." This is the heart of the issue. In Guatemala, the "fiscal burden"—total taxes collected as a percentage of the annual Gross Domestic Product, or GDP—was 8% in 1995, one of the lowest in Latin America. The commitment made in the Peace Accords was to increase this amount to 12% of the GDP by the year 2000, but it had to be rescheduled. It is now to be achieved by 2002. To do so, the Pact stipulates that there will be "a single tax reform" this year, along with "a comprehensive economic reactivation program." Clearly, without growth and social development, the tax reform will not contribute either to the country’s development or to greater social equity.

One of the most serious problems in Guatemala is that the state is poor, with little income, and is thus weak and excessively dependent. It is also in debt, mainly to the country’s domestic private financing system. In contrast, the pact sets forth the principle that tax income must make up "the largest share of state income." It puts this principle into effect with a pledge to ensure that taxes "cannot represent less than 85% of total income" beginning in 2001. It also sets out the principle of economic efficiency and puts it into effect with a commitment to review "fiscal privileges, exemptions and exonerations" during 2000 and gradually eliminate them. Naturally, it would be naïve to expect that this is going to happen without sharp frictions and conflicts.

The pact also establishes the principle of the overall progressive nature of the tax system. It concretizes this through two commitments: to increase the average tax burden as taxpayers’ average incomes increase, and to impose higher rates on taxpayers in the higher income brackets. To compensate for these measures, it establishes the principle of stable tax regulations with a commitment to make "one single tax reform in the course of 2000 for the period 2000-2004" that will effectively raise the tax burden to 12% of the GDP by 2002. Increasing the tax base, improving efficiency in collection, and ensuring transparency and efficiency in social spending are among the measures that will be implemented between 2000 and 2003. Finally, the principle of simplicity is established through the pledge to combine all the dispersed tax legislation into one single legislative decree by 2003 at the latest.

3. A professional, honest administration

The third chapter deals with one of the most delicate issues: problems in tax administration. Virtually everything depends on this and on raising civic awareness. High compliance with tax obligations is impossible unless the organization responsible for tax collection is professional and honest. Nor is it possible unless the criminal justice system gives increased priority to fiscal crimes, and the Public Ministry consistently prosecutes them. The pact deals with all these challenges. It refers to the issue of taxpayer confidence, the need to facilitate dealings with taxpayers and the need to generalize the use of sworn statements. It recognizes the need to establish an effective system "to attack the subterranean economy and fight tax evasion," though it is not explicit about whether subterranean economy refers to contraband or even more criminal operations.
To do this, it brings together the national police, the Office of the Superintendent of Tax Administration and the Judiciary, all under the Public Ministry. It deals with modernization—apparently electronic—of the Superintendent’s Office, construction of a single data base on taxpayers in 2000 and ongoing professionalization of the staff, including the preparation and wide dissemination of an Ethics Code to guide the actions of public officials and evaluations of their work.
All this assumes the drafting and publication of annual operations manuals and collection goals, as well as the quantification and evaluation of evasion and of the cost of collecting each tax.

Perhaps the trickiest part of the policies set forth in the pact is the gradual incorporation of the informal economy into the tax system to enlarge the tax base.
The pact recognizes the problems here, noting the need to consider "the sector’s economic and social characteristics, as well as the proposals of its representative organizations." Is there a trustworthy estimate of what the informal economy represents as a percentage of the GDP? Have the forum participants evaluated the efforts needed to meet this objective, which range from making the necessary investments to winning popular support? These are basic questions, since the pact calls for designing "special mechanisms" within a "global strategy" to achieve this objective. In Guatemala, a country with such enormous "social gulfs," one of the few advantages that allows the informal economy to redistribute income and therefore well-being more equitably is precisely that it is in many ways located outside the tax circuit.

4. Public spending, social pending

The fourth chapter of the Fiscal Pact deals with public spending. It clearly sets out the principle of prioritizing public spending according to the Constitution, the Peace Accords and the participatory democratic process. It establishes this priority through a commitment to meet the education, health, housing, justice, security and rural development spending goals established in the Peace Accords during the year 2000. Before the end of the year, after widespread consultation, "the government pledges to formulate proposals on the supply and demand of public investment and public goods" and present them "in a national forum for review and approval."
The most ambitious point in this chapter of the pact is the government’s commitment to "formulate and implement a National Public Investment System" between 2001 and 2004, "a Multi-Annual Public Investment Program" beginning in 2001, and "a Multi-Annual Public Spending Program" beginning in 2002. Clearly, this kind of planning assumes a capacity to govern far greater than that shown by President Portillo’s government thus far.

The principle is also established that "priority social spending cannot be used as an adjustment mechanism." It concretizes this principle by promising that in case of adjustment, "priority social spending will not decrease in real terms or as a proportion of the GDP." The pact recognizes the relationship between public spending and national production, "favoring productive over speculative investment." It speaks of the progressive nature of public spending, especially priority public spending, in which "a larger share of spending corresponds to the sector with the lowest income level." It proposes encouraging complementary public and private actions without neutralizing, limiting or restricting "the state’s obligations and guiding role." In keeping with this principle, it pledges to keep public investment above 4% of the GDP per year and emphasize "the implementation of projects in justice, security, education, health, social security, basic infrastructure, housing, natural resources and the environment, land ownership and efficient land use," all based on the agreements established in the Peace Accords on socioeconomic issues, agrarian issues and the rights of indigenous peoples.

In this chapter, the pact also deals with the issue of capability, calling for greater efficiency and transparency and high degrees of implementation in public spending. It puts this into effect through a commitment to adopt a "Management Indicators System" as part of an evaluation that includes the "assessment of economic and social impact, as well as financial, technical and administrative feasibility." The government also promises to present "consolidated figures on income, spending and debt beginning in 2001" and the pact recommends that municipalities and autonomous state organizations do so as well.

5. Rationalizing the public debt

The fifth chapter, on the public debt, establishes the principle that "the debt should complement but not replace internal efforts." It puts this into effect by limiting the total new public debt assumed from 2001 to 2003 to an annual average of approximately 1% of the GDP.
It further proposes the principle of planning the internal and external public debt management, and making information about it public. To do this, the government commits itself, among other things, to presenting the program for assuming, servicing and amortizing the public debt at the same time as the budget bill, "to decrease the uncertainty that these operations generate in financial markets."

6. Social function of public property

The sixth chapter, on public property, sets forth the principle that there should be a "social function to the access, use and transference of public property." It pledges to reform legislation to establish a "Law Regulating State Property."
It also guarantees open, free access to information on actions involving state property: "Beginning in 2001 an annual report will be presented to Congress on the evolution of the public patrimony," which will be widely disseminated. Before 2001, the Law of Responsibility and Integrity will be revised, subjecting all government officials "to the possibility being held personally, financially responsible" for mismanagement of public funds or illicit enrichment. A "preliminary tally by the state of the patrimony under its administration" will also be made in 2002; municipalities will be asked to do this as well. A mechanism for the protection and registry of state property will be defined in 2003. Key points in this chapter include the definition of fiscal income as public property, and the government’s commitment to publish "an annual report on tax evasion and fraud, as well as recommendations to eliminate it," beginning in 2000.

7. Rendering accounts against corruption

The seventh chapter deals with supervision and control. It describes the ethical nature of public service and pledges to establish mechanisms to evaluate the ethical performance of public officials by 2002, with programs on ethics education and knowledge of the law to begin in 2001. It also establishes the principle of treating "public resources as scarce resources," using the Management Indicators System. The problem of corruption requires the government and civil society to commit themselves to fight against impunity and corruption; the government must also present an annual report of detected cases of corruption. The pact recognizes the democratic principle behind accountability and puts it into effect by ensuring that Congress will carry out its function of ratifying or challenging the government’s annual rendering of accounts.

This chapter also establishes the principle of transparency and information. It calls for creating a commission in 2000 to present a bill on free access to information held by the government on the budget and all other aspects of public administration. It recommends that Congress approve a new Civil Service Law by the end of the year and draft a manual on the performance of public officials in 2001. Finally, it establishes the principle of carrying out a "social audit" of public management that involves "overseeing the overseers," since it includes an audit of the state auditing institutions.
To this end, "universities, research centers, business sectors and other civil society organizations pledge to present an annual report" on the issue starting in 2001.

8. Fiscal decentralization

The eighth and final chapter of the pact deals with fiscal decentralization. It defines decentralization as "the transfer of responsibilities, resources and capacities between two autonomous entities at different hierarchical levels." It establishes the principle that the provision of public goods and services "should be carried out at the closest feasible level of government to the communities." It notes that these steps must be taken in accord with real capacities, and calls for converting property tax into a municipal tax and making the necessary revisions of the multiple social funds.

A pact among a handful or a broad-based agreement?

The Civic Forum’s work on the fiscal pact has been extremely important, the first effort of its kind in Guatemala. It gives hope, because it shows that groups whose interests are often opposed have the capacity to negotiate, and also shows the potential for a national project latent in the Peace Accords. Above all, it gives hope because it represents a dialogue between civil society and the state, and in this sense is the closest thing to a "social pact" that Guatemala has ever known. Nonetheless, an important question remains as to how representative the various organizations that participated in the Civic Forum are. No publication of the pact’s text includes a list of "the 131 institutions and organizations representing the full social and territorial diversity of our country" proudly referred to by Arnoldo Noriega, the coordinator of the Commission to Accompany Fulfillment of the Peace Accords.
The Fiscal Pact was signed on May 25, and time pressured for its implementation. As the goal was to take the first measures in the second half of 2000, there was very little time to propose bills to Congress. The days after the signing were hot, conflictive ones. Finance Minister Manuel Maza Castellanos, whose experience in public finance dates back to the government of Vinicio Cerezo (1985-90), was the first to present a proposal to Congress. It apparently contained a tax on currency transactions, which everyone jumped on, arguing that, among other problems, it would encourage a parallel market and thus erode the tax base. The main problem, however, was the minister’s haste in presenting the proposal, without waiting for the recommendations of the special commission that the Civic Forum formed on this issue. This was especially troubling because this very minister had represented the government in the pact negotiations.

Other conflicts followed. Several obstacles appeared when it came time to apply the pact’s principles and commitments to tax reform, including an end to the policy of allowing people to deduct value-added tax on sales (VAT) from their income taxes, review and elimination of exonerations and privileges, tax on idle land, reimbursement to exporters of 90% of the VAT they pay on local goods and services (the government wanted to reduce this to 50%), and the increase in the VAT itself.

Tax reforms don’t live up to expectations

The tax reform will take place over the course of this year. Congress approved the first measures before June 30 so that they could go into effect on July 1. A new income bracket was established for individuals and companies. Until now, the maximum income tax rate was 25%; from now on, people who earn over 295,000 quetzals a year (approximately $37,000) will pay 31% income tax. However, Congress refused to abolish the policy of writing off VAT payments; taxpayers can still deduct them from their income tax by handing in their sales receipts with their tax returns. The more receipts they turn in to the Treasury, the less income tax they have to pay.
Another change has to do with the amount individuals and companies can write off for donations. Until now, they could write off all donations made to foundations, non-profit organizations or the state. Now a ceiling of 500,000 quetzals (approximately $62,000) or 5% of profits, whichever is less, has been established for these donations.

Along these same lines, companies can only write off a maximum of 5% of their profits for reinvestment and another 5% for the cost of training their workers under the new legislation. Also, new companies can write off their losses for five years; companies formed before June 30 are allowed no write-offs for losses.

Other taxes were changed as well: the airport tax rose from $20 to $30 while the annual car tax jumped 100%, from 55 to 110 quetzals (or approximately $7 to $14). Relatively high taxes were reestablished on alcoholic beverages, especially liquor and beer (20% for both), wine and cider (10%) and soft drinks (1%).

Reactions to these first legislative measures have varied. More than a few economists complained that the reform has not been thorough. Several human rights organizations, including Frank La Rué’s respected Human Rights Legal Assistance Center (CALDH), together with CONIC, one of the strongest rural organizations, announced their support for the fiscal pact. They described it as a step forward in a country "with no tradition of a taxpaying culture" in which "the principle evaders and defrauders have historically been those who have held economic and political power." They also came out against increasing the VAT until other commitments in the pact have been fulfilled. While they recognized that an increase in the VAT from 10% to 12% will have to be included in the tax reform, they insisted that this hike should be the last to go into effect since the VAT is a regressive tax, in June 2001 at the earliest.

The president of BANGUAT, the state bank, and thus a member of the Cabinet, deemed it incomprehensible that the government had not put into effect the elements of the agreement signed on June 20 by the Civic Forum’s special commission on tax reform. But CALDH, CONIC and other groups have criticized this agreement, saying it did not faithfully reflect the pact because it was not fully in keeping with the spirit of the Peace Accords and the pact itself on the need for a progressive tax system. BANGUAT’s president also said that "without reforming the VAT, it will not be possible to achieve the fiscal goals." He reaffirmed the "need for a state with the necessary financial resources to fulfill its basic functions." He strongly emphasized the basic issue: "It is very costly for the country not to have an adequate justice system, good infrastructure, education and health care. However painful the tax burden may be, the negative effect of taxes is less than all the damage done when public financing is not assured." On the other extreme, the great guru of Guatemalan neoliberalism, Manuel Ayau, continued to insist that everything depends on the incentive given to investment and that taxing capital returns discourages investment.

Will they grab the bull by the horns?

It remains to be seen if the government will manage to grab the tax reform bull by the horns, given the lack of agreement between executive and legislative branch proposals. When it comes down to it, this is where the going always gets rough in Guatemala, now as in the past. It remains to be seen what will be decided on repealing tax exemptions for export companies in the country’s free trade zones. Businesspeople say that if the government takes a hard stand on this issue, it will kill the goose that lays the golden eggs. Some economists have replied that investors do not choose a country solely because of fiscal privileges and that other conditions have an even greater impact on investment decisions, like the availability of good public services, security, absence of controls on the exchange rate, a free market and sufficient skilled labor. It also remains to be seen what will happen to the property tax, which sparked so much outrage several years ago that former President Arzú felt compelled to repeal even though it was proposed in a much more rational, equitable law. The whole issue of exemptions and privileges in general remains on the agenda, as does the VAT.

And once again, since fiscal issues go beyond taxes, other important actions are also still pending: reforming the Law on the Office of the Superintendent of Tax Administration and making real changes in its operations, prosecuting evaders, programming public spending and ensuring transparency. The fiscal pact has been a monumental achievement. Let us hope that it gives birth to a healthy child in the form of a tax reform with social equity and economic efficiency.

A government without a course or a course without a government?

Any government offered the opportunity to carry out a consensual tax reform on a silver platter should have jumped with joy, as some of Guatemala’s most respected economists have pointed out. But the government of Alfonso Portillo and General Ríos Montt is not just any government. It is one that has already lost a great deal of credibility, rare after only six months in office, and is perceived as drifting, without a course. It’s not just that 83% of the population polled in the survey done after the government’s first six months believe that Portillo is not keeping his promises, but also that 73% no longer believe what he says in his speeches. It’s not just that people believe Ríos Montt wields more power from his position as president of Congress than the President of the Republic (32% vs. 26%), but also that 73% believe the General has the most influence on the President’s decisions. The people see the General and the President as one, a perception suggesting that what really exists here is a course without a government.

The President is not the only one who has flunked his first six months in office, according to 65% of the people surveyed. Nearly half (48%) see his government as worse than that of Alvaro Arzú (only 26% feel it is better), and 52% feel that this Congress, dominated by Ríos Montt’s Guatemalan Republican Front, is worse than the Congress controlled by Arzú’s National Advancement Party (only 25% feel it is better). To top it off, 46% of the people feel that the members of Portillo’s team are corrupt (only 20% see them as honest) and another 46% feel they are incapable (only 21% see them as capable). Finally, the majority of people believe that the economic situation (64%), jobs (58%), public safety (54%) and transparency (49%) are worse than under the previous government. Despite all this, a surprising 47% of those polled still expect Portillo’s government to do better than its predecessor. The surprise is mitigated somewhat by observing that more people feel that education has improved (31% vs. 22% who think it worse; the rest feel it is still the same). And more people feel that public road works are in better shape now (39% vs. 23%), which is itself surprising since public works were the previous government’s pride.

The worst sign of the executive branch’s performance is its limited capacity to implement the budget. According to the Finance Minister, barely 37% of budgeted public spending has been executed each quarter. At the same time, the use of funds under the President’s discretion has increased considerably in comparison with Arzú’s government.

Another "consolation" for Portillo, though it would be a foolish and terrible mistake for him to actually be consoled by it, is that the country’s other institutions are in equally bad or even worse shape than the presidency. People feel that most institutions do their jobs poorly, including political parties (71%), private business (58%), the courts (55%), the police (52%) and the army (45%). Those perceived as doing a good job are the media (78%), the churches (71%) and the Office of the Ombudsperson for Human Rights (47%).

Disenchantment and poor governance

A few days before the poll was published, Portillo was asked how he himself would rate his presidency. With exceptional humility or a great deal of disenchantment on his own part, he replied "fair." The people’s "guarded disappointment" with Portillo forms part of an almost cloying atmosphere of general disenchantment. With the war still so close and the culture of violence it left as a legacy, this disenchantment lies at the root of the country’s increasing lack of good governance. The problem is exacerbated by the fact that Guatemala is one of the countries caught in the vicious circle of exclusion that globalization has reserved for strategically unimportant small countries in what was until recently called the Third World.

Portillo’s government has little room to maneuver. The fiscal pact suggests a different way to govern, with greater citizen participation. This route leads to increased capacity, public awareness and political will. Goods like solidarity and the beginning of the end of impunity don’t cost much money. What does cost is ensuring that, in the struggle to achieve the welfare of the majority, many people "aren’t left behind," as the Popol Vuh would say.

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