Press Release: Statement by IMF Deputy Managing Director Agustín Carstens at the Conclusion of a Visit to Guatemala
July 12, 2005
International Monetary Fund (IMF) Deputy Managing Director Agustín Carstens made the following statement in Ciudad de Guatemala on July 8, 2005:
"This is my first visit to Guatemala as Deputy Managing Director of the IMF, and it is a great pleasure for me to be here today. During my visit, I had the privilege of meeting with President Oscar Berger Perdomo, Vice President Eduardo Stein and the economic cabinet, including Finance Minister Antonieta de Bonilla and Central Bank President Lizardo Sosa. I also had the opportunity to meet with members of congress, the private sector, and civil society. The IMF greatly values this opportunity to continue developing the productive dialogue with the Guatemalan authorities.
"Guatemala is a pillar of macroeconomic stability in Central America. Since the 1996 Peace Accords, Guatemala has pursued prudent fiscal and monetary policies and important structural reforms, which greatly increased the economy's resilience to shocks. More recently, the authorities have made major efforts to improve transparency and governance that will help improve the investment climate and support higher growth and poverty reduction.
"The outlook for Guatemala remains favorable, although there are important challenges. In particular, poverty and income inequality remain large, and Guatemala needs to achieve higher rates of economic growth in order to meet its social development objectives. I was reassured in my meetings today about the broad consensus that exists in Guatemala on the importance of meeting these challenges. I was also encouraged by the government's ongoing efforts to build consensus on the specific policies and measures needed to achieve these goals. In particular, the authorities assured me of their commitment to continue the efforts necessary to mobilize the resources the country requires for higher investment in infrastructure, human capital, and priority social programs. These efforts will be key to Guatemala's outlook for sustained higher growth and social progress, and I hope that the necessary broad domestic consensus can be found to implement it on a lasting basis.
"I would also emphasize the need to avoid a regional competition for foreign investment through the use of fiscal incentives. In our experience, such incentives rarely create more employment and growth, but rather a significant erosion of revenues. I would therefore encourage an enhanced regional cooperation to avoid such competition.
"The President and the economic team also shared my view that Guatemala's longer-term growth prospects depend importantly on further reforms to entrench sound fiscal management, including through ongoing initiatives to strengthen public expenditure control and fiscal transparency, and improving the investment climate, by modernizing the legal system. I commended the authorities for the important progress that has already made in strengthening the financial sector, and welcomed their commitment to maintaining the reform momentum in this area. In particular, the process of bringing the offshore banks into the regulatory framework needs to be completed, the bank resolution framework revamped, the central bank put on a solid financial footing, and the payments system modernized.
"During our meetings, I also had the opportunity to discuss with the authorities how the Fund can be most helpful in meeting these challenges. I sensed a strong desire on the part of the authorities to maintain and further deepen the close policy dialogue and technical assistance effort we have had over the past few years, and we look forward to continue assisting Guatemala in its quest for sustained higher growth and poverty reduction."