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The Inverse Relationship Between Economic Growth and Sustainability in

Guatemala
December 2013

Abstract: The paper will start with the history of Guatemala and its economy. This will
give readers the sufficient background knowledge to understand why the economy is in
the state it is in today. Specific examples of economic growth will be highlighted along
with the general trend of Guatemalas economy. The unrivaled gap between the rich and
the poor will be exemplified with a comparison of Guatemala City and Chichicastenango.
The case studies of the Santo Tomas de Castilla Port and the Marlin Mine will show
economic growths harmful effects on the environment. The paper will end with
Guatemalas economic and environmental predictions for the future.

From the beginning, Guatemala was a country dominated by some of the most
resourceful and successful new inhabitants of the Americas. Between A.D. 250 and 900,
the Mayans had spread their vast empire all the way from Guatemala to Southern Mexico
(Croy). They used the tools provided to them by the land to sustain a successful and self-
made economy. The Mayans used resources such as stone to build some of the most
impressive monuments in history. They relied on the land for hunting, fishing, and
farming corn, squash, and beans.
The Mayan Empires economy catered to their internal needs. This all changed
when Spain invaded in the 16
th
century. Set up as a branch of the Spanish economy
instead of an independent economy now, Guatemala was run very differently. As a
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Spanish colony, Guatemala no longer produced the goods that served them best
internally. They were instead forced to live for and like the Spaniards. The Quich, one
of the smallest remaining powers of the Mayan Empire, were forced to work as slaves on
farms. These farms produced crops that were exported to the mother country Spain.
Agriculture was not the only sector of life that the colonists disrupted in
Guatemala. The new colonys towns were built based upon the layout of towns in Spain.
The Spaniards had no regard for the way life had been previously lived in their newly
acquired territory. Religion was even disturbed as Christianity was taught to the
Guatemalans. Their own sense of self and pride seemed to rapidly disappear for almost
three hundred years. A call for independence changed this. After violence and
controversy, Guatemala declared their independence from Spain in 1821 (Croy). The
1870s marked the start of the coffee exportation that resulted in a huge rise in their
economic activity. Guatemalas economy has been one of importance ever since.
Guatemala has experienced many advances in their economy over the past fifty
years, several resulting from an increase in trade. In 1960, the country signed the General
Treaty on Central American Economic Integration to join the Central America Common
Market (Hansen). The CACM was created by and for five Central American Nations.
Their goal was to increase regional free trade in order to mutually boost their economies
(Encyclopedia Britannica). And in Guatemala, it worked. The agreement raised the
developing countrys annual growth rate from 4% per year to 5.5% per year in the 1960
decade.
Guatemala was able to focus more on growth through trade after settling internal
battles and signing the Peace Accords in 1996. The relationship between Guatemala and
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the United States has developed in both countries favors. As of 2003, the United States
constituted 41% of Guatemalas imports. We also receive 34% of Guatemalas exports
(Shields). Guatemala has also strengthened their relations with their neighbor Mexico.
In 2000, Guatemala, Mexico, El Salvador, and Honduras signed the Mexico-Northern
Triangle Free Trade Agreement. This agreement aimed to reduce tariffs placed on the
goods traded between these four countries. A similar agreement, the Dominican
Republic-Central America-United States Free Trade Agreement, was signed in 2004. It
increased free trade and communication between the United States, Guatemala, and other
countries (CAFTA-DR). Through these types of treaties, Guatemala was able to increase
its exports and take an essential step into the global economy.
Economic growth in Guatemala can also be observed through its increase in
tourism. The infrastructure of the tourism business is currently being greatly improved.
In 2011, two new airlines began to offer flights from Mexico to Guatemala City (Travel
and Tourism). In the same year, Guatemalas Tourism Chamber came out with the very
first Official Visitors Guide (Travel and Tourism). These changes, along with stability
within Guatemala, will increase tourism. The country also hopes to implement a tourism
tax for entering and leaving. The intention of the tax is to increase money in the
economy as well as increase the safety of the countrys visitors.
Because of Guatemalas violence-ridden past, tourists have been hesitant to visit
the country. Tourism has increased since the settling of the Civil War in 1996 (Croy).
While in Guatemala, tourists spend their money on hand made clothing, jewelry, and art.
Tourists spent over one billion dollars in Guatemala in the year 2006 (Croy). This money
contributes to the growing infrastructure and economy as a whole. Through new and
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improved transportation, Guatemala hopes that the easy access will encourage tourists to
travel to their country. Guatemala is taking the necessary steps to increase tourism, and
as a result, increase spending in their country.
Aside from signing agreements with other countries, Guatemala is also making
internal changes in order to increase trade. Forests are being cleared for more farmland
in order to increase agricultural output. Small mining operations are being taken on. The
land naturally supplies lead, zinc, and antimony (Croy). Factory jobs are on the rise, and
as on 2004, 15% of Guatemalans worked in factories (Croy). The factories produce
everything from medicine to clothing, and their goods are sold all over the world.
The Guatemalan economy currently faces an unrivaled gap between the rich and
the poor. Half of the entire countrys wealth lies in the hands of the top 10% of the
population. The rest of the wealth is distributed in the 30% of people who live on less
than two dollars a day, and the 13.5% who live on one dollar per day (Croy). There are
two specific cities that exemplify the disparity of life style. In Chichicastenango, poor
farmers sell their crops at a biweekly market. Flowers, avocados, onions, and quetzals
are exchanged by women in traditional clothing (Croy). In Guatemala City, these poor
producers would be overwhelmed by the huge sky scrapers. The city is the most
populous of all of Central America with a reported population of about 1,075,000 people
(Shields). The bustling hub serves as the countrys financial, cultural, and historical
center.
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The wealth that has accumulated itself in the city is not evenly distributed throughout the
country. It is vital to close the gap between the rich and the unbelievably poor in order
for economic growth to continue in Guatemala.
Unfortunately, Guatemalas economic inferiority leads the country into an entirely
different problem: environmental degradation due to economic growth. Although the
economy may be expanding due to of the reforms mentioned above, the effects on the
environment are extremely negative. Mining for metals such as lead, zinc, and antimony
is a part of the economy (Croy). But these mines are having lasting effects on the
environment that many are starting to take notice of. In early July, President Otto Perez
Molina expressed concern for the mining practices of his country. He suggested a two-
year suspension of mining for the purpose of reforming the industry (Hufstader). It has
Although fairly close in proximity, these two cities could not differ more.
http://www.stayxs.com/guatemala/images/guatemala-map.jpg
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been reported that there are numerous cases of both indigenous and non-indigenous
communities objecting to mining projects out of concern for the environment
(Hufstader). The costs of mining are beginning to outweigh the benefits.
In May 2010, Physicians for Human Rights completed a study entitled Toxic
Metals and Indigenous Peoples Near the Marlin Mine in Western Guatemala. Their aim
was to highlight the potential dangers of the Marlin Mine on the people living near it.
Studies were done on the water downstream from the mine, as well as on the actual
people living in close proximity to the mine and stream. The findings reflected the idea
that the mine was polluting the areas around it. Blood lead, urine mercury, arsenic,
copper, and zinc were found in higher concentrations in bodies living near the stream and
mine than in those living away from them (Basu). The closer the distance to the actual
mine, the higher the concentrations of these metals in the environment. The conclusion
was that both bodies and environments located closer to the mine contain higher
concentrations of the metals.

















The Marlin Mine is located in western Guatemala.
http://intercontinentalcry.org/wp-content/uploads/marlin-mine.png
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The Marlin Mine is just one example in which economic development led to
ecological degradation. The Guatemalans intended to use the resources that their specific
area of land had supplied to them. The mining, producing, and trading of these resources
would allow the country to take a step further into the global market. The mines created
jobs internally and contributed money to the economy. Unfortunately for those living
near the mine, more harm than help was experienced due to its byproducts. Their bodies
were exposed to toxic metals through water and the Earth.
The Indigenous people also face another injustice in the midst of economic
growth. In June 2005, the Indigenous people in the regions surrounding the Marlin Mine
voted. Of the 12 communities present, 11 rejected the mining (Zarsky). The
government, who had previously promised the Indigenous more rights in the 1996 Peace
Accords, completely ignored their modest request. Instead, they pushed on, claiming that
the mine does not pose a threat (Zarsky). These Indigenous people had faith that their
government would increase its respect for their opinions, but they were proven wrong. It
is extremely hard for a broken country to work together to advance. Economic growth is
dependent upon the relationships inside of Guatemala. Without trust in their government,
the Indigenous people have no reason to work for the good of their country.
Mining is not the only harmful industry being perpetuated by economic
incentives. In 2004, a cruise ship terminal was added to the Santo Tomas de Castilla
Port. An immediate increase of tourism was seen, meaning more money being spent on
and in the country. The new port created jobs as well as an added a stop on cruise ships
paths. About four cruise ships dock at the Santo Tomas de Castilla Port each month. The
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increased number of people visiting and spending money in Guatemala is helping their
economy to grow.
The added port not only means more tourists, but also an increased number of
cruise ships. These ships are extremely harmful to the environment, both the land and the
water. The Environmental Protection Agency estimates that in just one day, passengers
on a cruise ship will create one ton of garbage, 170,000 gallons of dirty water, and an
impressive 6,400 gallons of oil-contaminated ocean water (Farden). The EPA also
acknowledges the difficulties of regulating an entity that is constantly between the
borders of many different countries. A consistent policy on how this waste is to be
dumped does not exist. Disparity exists even within the United States itself. In states
where it is illegal to dump dirty water off of the coast, some cruise ships will dump it up
in Canada. The rest of the states coasts will be polluted with the waste. This is a
convenient short-term decision made by people who are unable to realize the bigger
picture. The Earth is not separated by place; it is one big cycle. Polluting a different part
of the Earth rather than another is not solving anything.
Guatemalas economy is on the rise. Unfortunately, this also means that its level
of pollution is heading in the same direction. The ever-evolving country is predicted to
endure some heavy changes within the next twenty years. The Guatemalan government
predicts a complete urbanization movement. The populations of Guatemala City and the
areas around it are predicted to continue to grow. Although the economy will be boosted
by the increase in consumption and demand, Guatemalas environment is going to be
further pushed. The challenge that the improving economy is presenting to the
environment should be one that should be welcomed. In a country that has continually
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struggled to keep its head above water, any economic improvement is a positive thing.
The fact that Guatemala is even considering economic degradation a national issue shows
how far the country has come. Its main focuses have transformed from simply
stimulating the economy to stimulating the economy in the most harmless way possible.



















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Annotated Bibliography
Anonymous. "Guatemala In The Global System." Oxford Economic Country Briefings
(2009): 1-4. ProQuest. Web. Sept. 2013.
<http://ezaccess.libraries.psu.edu/login?url=http://search.proquest.com/docview/1
98665057?accountid=13158>.
This article presents numbers for GDP per capita, population, life expectancy, etc.
It has very concise information that will be helpful as a reference. It also forecasts
data for 2010, which I will compare to the actual data from 2010. This will lead
me to the conclusion of whether Guatemala is growing in a predictable way.

Basu, Niladri, and Howard Hu. "Toxic Metals And Indigenous Peoples Near The Marlin
Mine In Western Guatemala." Physicians for Human Rights, May 2010. Web.
Sept. 2013.
This report presents the findings of two physicians studying the health and
environmental impacts of the Canadian-owned Marlin Mine in Western
Guatemala. The mine targets gold.

"CAFTA-DR (Dominican Republic-Central America FTA)." Office of the United States
Trade Representative. N.p., n.d. Web. 04 Dec. 2013.
This sources gives an overview of the Dominican Republic-Central America-
United States Free Trade Agreement. It explains who was involved and what each
participant hoped to gain from the agreement.

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Cardemil, Leonardo, Mercedes De Costa, Alberto Espejo, Jerome La Pittus, Ewe Ghee
Lim, and Marcio Ronci, comps. Rep. no. 98/71. N.p.: n.p., n.d. Guatemala:
Recent Economic Developments. International Monetary Fund, Aug. 1998. Web.
Sept. 2013.
This report dives deeper into the information outlined in my book source. Graphs
and charts are presented as well as statistics. Economic growths are presented
along with the internal problems Guatemala face. The graphs presented will serve
me well on my quest for accurate numbers.

Chase-Dunn, Christopher. "Guatemala In The Global System." Journal of Interamerican
Studies and World Affairs 42 (2000): 109-26. Full Text. ProQuest, Oct. 2011.
Web. Sept. 2013.
This article outlines the correlation between Guatemala's upward trend of
economic growth and their ecological degradation. It looks at the problems that
the country faces through a global perspective. This source will be valuable in my
research regarding the effects of growth on the environment.

Croy, Anita. Guatemala. Washington, D.C.: National Geographic Society, 2009. Print.
This book outlines the country Guatemala is today, how it came to be that way,
and the role that it plays in global economics. Economic growth, including
mining, manufacturing, and trading, are highlighted. I will do further research on
their effects on the environment, but this book has prompted that research.
Overall, this book serves as a very general overview of Guatemala's past, present,
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and future.

The Editors of Encyclopedia Britannica. "Central American Common Market (CACM)."
Encyclopedia Britannica Online. Encyclopedia Britannica, 2013. Web. 06 Dec.
2013.
This source explains the purpose and reasoning behind the creation of the Central
American Common Market.

Farden, Katie. "Green Cruising or Cruise Ship Pollution?" The Daily Green.
InvestigateWest, n.d. Web. Sept. 2013.
The site outlines the harmful effects of cruise ships on the environment. It will
support my case study of the newly opened Guatemalan port, Santo Tomas de
Castilla.

"Guatemala: Economy." GlobalEDGE: Your Source for Global Business Knowledge.
Michigan State University, 2012. Web. 02 Oct. 2013.
This site provides background information on Guatemala's current economy. It
also compares the country to the rest of the world in terms of GDP, population,
and income distribution. It will serve as a baseline for my research.

Guatemala Economy: Quick View - Planning for Urban Development. Rep. N.p.: n.p.,
n.d. ProQuest. Web. 9 Dec. 2013.
<http://search.proquest.com/docview/1462882879/1423E9059A163299B36/2?acc
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ountid=13158>.
The trajectory of Guatemala's economy is predicted. The country's overall fate is
discussed.

"Guatemala GDP Annual Growth Rate." Trading Economics. N.p., 2013. Web. 02 Oct.
2013.
This site offers a summary, bar graph, and line graph of Guatemala's GDP Annual
Growth Rate from 2008 to 2012.

Hansen, John R. "Economic Development: Pattern of Growth." Guatemala: Economic
and Social Position and Prospects (1983): 25-30. Print.
This article outlines the long-term trends of Guatemala's economy and the
possible reasons behind the varying rates of growth.

Hufstader, Chris. "Guatemala's President Proposes 2-year Mining Moratorium." Oxfam
America. Oxfam America, 29 July 2013. Web. Sept. 2013.
The site highlights the indigenous Guatemalans' concerns regarding their safety
and their country's environment caused by the current mining practices.

Shields, Charles J. Guatemala. Philadelphia: Mason Crest, 2003. Print.
This book provides an overview of Guatemala's current economic and past
political struggles.

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"Travel and Tourism in Guatemala." Travel and Tourism in Guatemala. Euromonitor
International, Apr. 2012. Web. Sept. 2013.
This travel site highlights the improvements that Guatemala's tourism industry
had made over the past couple of years.

Zarsky, Lyuba. "Searching for Gold in the Highlands of Guatemala: Economic Benefits
and Environmental Risks of the Marlin Mine." Global Development and
Environment Institute Tufts University, Sept. 2011. Web. Dec. 2013.
This document highlights the ecological damage that has been brought out by the
Marlin Mine. It also discusses the social injustice behind the mine.