4.22.08 - Lecture 4.22.2008 Guatemala The economy Neo...

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Lecture 4.22.2008 Guatemala The economy Neo Liberalism Ethnic Question Negotiations Marco Cerezo (Christian Democrat)- Dec 1985 Won elections Undertake mild reforms But would not press for land reform Not repressing strikes Taxing unused agricultural land Acknowledged power would be limited due to the power of the military International financing for the country only came because they allowed a civilian to take office 1980 Worst Economic Crisis Sharp cut in the price of Guatemala’s main export products Major contraction in the sale of Guatemala’s industrial goods Private sector was too nervous to invest and instead they shipped large amount of capital abroad Military government (Lucas Garcia) tried to compensate for private sector’s lack of investment large scale public works project, this only compounded the foreign debt because of military corruption Fiscal deficit increased rapidly- states have income from taxes, grew more because of the spending in large public works project The key sector of the economy crashed, export crop production increased, unemployment increased by 500%
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o No aid or unemployment benefits for people Most turned to informal sectors Those that still had jobs dealt with low wages because of inflation Prices increased 35% but wages were still staggering Food prices had serious political consequences 1985-The price of maize and beans rose by 300% Guatemala- experienced deindustrialization o Triggered by the collapse of the central American common market o New model of development in 1970s It is dependent on non traditional exports Traditional (cattle, cotton, bananas) Non traditional 1970s(Agriculture) Winter vegetables and flowers for the North This approach was formalized through the Caribbean Basin initiative o Initiative of Ronald Reagan o Gave preferential treatment of duty free access to US markets o Gave US investors incentives to invest in the country o In non traditional exports key beneficiaries were the US based
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4.22.08 - Lecture 4.22.2008 Guatemala The economy Neo...

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