## 1. Export Performance

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---

### Executive summary
- Guatemala has low exports per capita relative to its development level and to most Central American countries despite favorable geography and Free Trade Agreements.
- Exports of goods and services have declined as a share of GDP over the last twenty years; goods exports drove the decline while service exports remained broadly stable.
- Guatemala’s export basket is highly diversified (low Herfindahl-Hirschman index) but concentrated in many small sectors, producing low total exports per capita.
- Guatemala has low complex exports per capita and stagnant export complexity over recent decades, despite not being dominated by hydrocarbons/minerals.
- The average Product Complexity Index (PCI) for Guatemala’s ten highest complex exports is 0.47; comparators: Costa Rica 0.89 and Mexico 0.92.

### Recent export trends and sectoral performance
- Manufacturing exports fell by about 5 percentage points of GDP during the last decade.
- Extractive industries’ exports declined by about 1-2 percent of GDP following the 2014-15 oil price slump.
- Agriculture exports fluctuated around 4-6 percent of GDP throughout the last decade.
- Services exports as percent of GDP also declined, with contractions in travel services accounting for most of the decline.

### Export complexity and composition
- Guatemala’s most complex exports include:
  - Alcohol (PCI of 1.48)
  - Heating and Cooling equipment (PCI of 1.26)
- Comparator complex exports:
  - Costa Rica: Optical elements (PCI of 2.21)
  - Mexico: Measuring, Controlling, and Scientific Instruments (PCI of 2.01)
- Manufacturing and services exports per capita in Guatemala are markedly below comparators such as Costa Rica.

### Determinants of export performance (literature and empirical findings)
- Distance to market and standard gravity equation variables are significantly associated with NHM, manufacturing, and complex exports per capita.
- A Proximity to Markets (PM) index explains about a quarter of the variation in NHM, manufacturing, and complex exports per capita.
- Empirical associations reported:
  - Increasing schooling attainment by one standard deviation more than doubles NHM, manufacturing, and complex exports.
  - Enhancing governance by one standard deviation increases these exports by about 30-40 percent.
  - Improving infrastructure by one standard deviation increases these exports by about a third.
  - Cutting tariffs from 15 to 5 percent increases these exports by almost half.
- Adding PM and the policy variables can explain up to 80-90 percent of cross-country variation in NHM and complex exports.

### Guatemala’s specific strengths and weaknesses
- Strength:
  - Guatemala’s Proximity to Markets (PM) index is higher than all shown comparators, reflecting geographic advantage including access to North American markets and both ocean basins.
- Weaknesses:
  - Education: Learning Adjusted Years of Schooling are below most comparators, especially Costa Rica and EAEM; both low expected years of schooling and low harmonized test scores contribute.
  - Governance: Low across multiple Worldwide Governance Indicators, notably Political Stability and Absence of Violence, Government Effectiveness, Rule of Law, and Control of Corruption.
  - Infrastructure: Weak on roads, railroads, ports, and airports relative to competitors; poor road infrastructure is particularly detrimental to agricultural exports.
  - Crime: High intentional homicide rate; current rate cited as 22.5 homicides per 100,000 people (down from 45 per 100,000 people in 2009).

### Quantified potential payoffs from reforms (empirical estimates)
- Education:
  - An increase in the United Nations Education Index of one standard deviation is associated with an increase of 150 percent in NHM exports.
  - Matching Costa Rica’s Education Index could increase Guatemala’s complex exports by about 230 percent.
- Governance and crime reduction:
  - Reducing the homicide rate from 22.5 per 100,000 people to the world average of 7 could be associated with an increase in NHM export complexity of 25 percent.
  - Bringing governance standards to Caribbean (CAR) levels could increase Guatemala’s complex exports by 70 percent.
- Infrastructure:
  - Matching East Asian Emerging Markets (EAEM) infrastructure could increase NHM exports per capita by 45 percent.
- Policy variables:
  - One standard deviation improvements or tariff cuts (e.g., from 15 to 5 percent) have substantial multiplicative effects on NHM, manufacturing, and complex exports.

### Policy implications and reform avenues
- Priority horizontal policies to strengthen:
  - Education: raise expected years of schooling and improve learning outcomes to lift Learning Adjusted Years of Schooling.
  - Governance: improve Government Effectiveness and Control of Corruption; address Political Stability and Absence of Violence.
  - Infrastructure: invest in roads, ports, rail, and airports to reduce transport costs, with particular focus on agricultural supply chains.
  - Trade policy: reduce tariff barriers (example: from 15 to 5 percent) to increase NHM and complex exports.
- Crime reduction and public-order reforms can yield meaningful export complexity gains and improve cost competitiveness.
- Reforms targeting these horizontal policies could realistically bring Guatemala’s exports per capita and complexity closer to levels observed in Costa Rica and EAEM countries.

### Logistics and infrastructure constraints
- The World Bank’s Logistics Performance Index points weaknesses for Guatemala relative to East Asian Emerging Markets and peers in Central America, with Guatemala ranking unfavorably to all comparators in: Quality of Customs, Logistics Services Quality, Tracking and Tracing, and Ease of International Shipments.
- The most significant constraints to export development and complexity are identified as: weak governance (particularly related to high crime, low government effectiveness, and weak control of corruption), low access and quality of education, and weak infrastructure (particularly related to roads, railroads, ports, and airports).
- The analysis estimated that if Guatemala were to close its governance gap with the world average it would increase its per capita real GDP growth by between 0.2 and 0.8 percentage points.

### Electricity, household costs, and labor cost competitiveness
- Electricity:
  - The average electricity cost to firms in Guatemala is US$0.16 per kWh; this is not significantly different from the cost in other countries near the North American market but is considerably higher than for EAEM countries.
  - Electricity costs faced by Guatemalan households exceed those in its comparators and rank 15th highest in the world in 2021.
- Household costs and reservation wages:
  - Increasing living costs for the labor force have an indirect effect on firms’ costs as households increase their reservation wage, further eroding export competitiveness.
- Labor costs:
  - Labor costs for low skilled workers appear particularly high in Guatemala relative to comparators. The minimum wage to GDP per capita ratio (a broad proxy for unit labor costs, especially of formal low skilled workers) is much higher than in comparator regions/countries and is one of the highest among middle income countries.
  - Guatemala’s minimum wage relative to GDP per capita is particularly high compared to nearby manufacturing exporters Dominican Republic and Costa Rica, which compete with Guatemala for the North American market.
  - Panel Figure A.1. shows a strong negative relation between the minimum wage per capita ratio and per capita exports, consistent with trade-model expectations that high unit labor cost negatively affects export development.

### Export determinants, scenarios, and potential gains
- Guatemala’s export level aligns with its geographic location and four horizontal policy areas: proximity to markets, education attainment, governance, infrastructure, and tariff openness—these predict well Guatemala’s current level of NHM Exports per Capita (based on Salinas (2021)).
- Estimated payoff scenarios:
  - Bringing education, governance, and infrastructure to the levels in Costa Rica would generate a sixfold increase in Guatemala’s total exports and a ninefold increase in its complex exports—allowing Guatemala to match the export per capita level and complexity of Costa Rica and EAEM countries.
  - Improving education, governance, and infrastructure to levels commensurate to its per capita income could enable Guatemala to fivefold increase its total exports and sevenfold increase its complex exports.
- Policy actions underway:
  - The Guatemalan government is implementing reforms including conditional transfers on education, digital transparency, crime reduction, promotion of PPPs for infrastructure development, and is considering Labor reforms on part-time work and minimum wage to better align wages to productivity.

### Characterizing recent inflation dynamics in Guatemala
- Main findings:
  - Inflation rate for the bottom-income quintile has likely been considerably different from the inflation rate facing the top-income quintile in the post-pandemic period.
  - The impact of local food prices in Guatemala appears disconnected from global food prices.
  - Inflation dynamics are mainly driven by local rather than global factors.
- Method and data:
  - CPIs for different income quintiles in Guatemala are proxied using expenditure weights (12 expenditure divisions) employed by the Dominican Republic, applying those weights to Guatemalan CPI expenditure division series (January 2020 = base period).
  - Monthly CPI for each income quintile i in Guatemala is constructed according to the equation provided in the source with variables defined as in the source document.
- Evolution and heterogeneity:
  - There has been considerable heterogeneity across inflation rates facing different income quintiles. Annual inflation rates differed markedly since the start of the pandemic, particularly between the bottom-income quintile (q1) and the top-income quintile (q5), with the remaining quintiles in-between.
  - The second half of 2020 saw differences in annual inflation of over 3 percentage points between the poorest and richest quintiles.
  - Three identified phases for q1 vs q5 since the pandemic onset:
    - Phase 1: From outbreak until 2021Q2, bottom-income quintile faced considerably higher inflation than top-income quintile—driven by a decline in fuel prices (more important for top quintile) and higher rise in food prices (more important for bottom quintile) due to natural disasters (Eta and Iota) and pandemic-related food disruptions in 2020.
    - Phase 2: 2021Q2 to 2021Q4, economic recovery reversed the pattern as fuel price rebound and moderation in food prices resulted in higher inflation for top-income quintile relative to bottom-income quintile.
    - Phase 3: Recent months, inflation rates for both quintiles increased amid higher food, fuel, and other prices; the purchasing power of the poorest has declined more relative to the richest quintile.
  - The CPI gap between poorest and richest quintiles widened since the pandemic outbreak, narrowed during 2021, and showed tendency to widen again in the most recent period.
- Regression insights on q1–q5 differential:
  - Specification tested role of global food and fuel prices in explaining the inflation differential d_i.
  - Regression results deliver two key findings:
    - Higher global fuel prices lead to a lower inflation differential (they affect q5 relatively more than q1). This result is significant at the 1 percent level for Guatemala and all regional peers.
    - Global food prices generally lead to a larger differential for most countries (food matters more for q1 than q5). However, for Guatemala the regression results show the opposite sign: global food prices do not contribute to a larger q1–q5 inflation differential as they do for regional peers.

### Principal Components Analysis (PC analysis) and concluding remarks
- Objective and data:
  - Evaluate hypothesis that global factors are not important drivers of inflation in Guatemala using principal components extracted from overall CPI and twelve inflation divisions in Guatemala; and non-Guatemalan data (US inflation measures and global prices and activity).
  - Data frequency and sample: quarterly data from 2012Q1 to 2022Q1.
- Key statistical findings:
  - The first three PCs explain around 65 percent of the variation of the 13 quarterly inflation series.
  - Five PCs (with eigenvalues exceeding 1) explain around 85 percent of the variation of the 13 series.
  - In the case of the global series, the four PCs explain around 85 percent of the variation of all of the series.
- Interpretation:
  - The first three PCs largely reflect Guatemala-specific factors: they explain a large variation of CPI and food inflation in Guatemala but do not explain much of energy-related inflation in Guatemala or inflation in the US or other global inflationary developments.
  - Global PCs explain a large share of variation in global variables but do not explain much of the variation of Guatemalan inflation variables; only the first PC is significant in the food and energy equations for Guatemala.
- Concluding synthesis:
  - Principal components analysis provides further support for the conjecture of a disconnect between global and local price developments in Guatemala.
  - The analysis highlights the prevalence of local rather than global factors in explaining inflation dynamics in Guatemala.

*Source: FOSTERING EXPORT DEVELOPMENT IN GUATEMALA (Prepared by Gonzalo Salinas), May 16, 2022. (IMF country report excerpt.)*

### 1. Export Performance ___________________________________________________________________ 4

### 1. Export Performance

### Executive summary
- Guatemala has low exports per capita relative to its development level and to most Central American countries despite favorable geography and Free Trade Agreements.
- Exports of goods and services have declined as a share of GDP over the last twenty years; goods exports drove the decline while service exports remained broadly stable.
- Guatemala’s export basket is highly diversified (low Herfindahl-Hirschman index) but concentrated in many small sectors, producing low total exports per capita.
- Guatemala has low complex exports per capita and stagnant export complexity over recent decades, despite not being dominated by hydrocarbons/minerals.

### Recent export trends and sectoral performance
- Manufacturing exports fell by about 5 percentage points of GDP during the last decade.
- Extractive industries’ exports declined by about 1-2 percent of GDP following the 2014-15 oil price slump.
- Agriculture exports fluctuated around 4-6 percent of GDP throughout the last decade.
- Services exports as percent of GDP also declined, with contractions in travel services accounting for most of the decline.

### Export complexity and composition
- The average Product Complexity Index (PCI) for Guatemala’s ten highest complex exports is 0.47; comparators: Costa Rica 0.89 and Mexico 0.92.
- Guatemala’s most complex exports include Alcohol (PCI of 1.48) and Heating and Cooling equipment (PCI of 1.26).
- Costa Rica’s leading complex exports include Optical elements (PCI of 2.21); Mexico’s include Measuring, Controlling, and Scientific Instruments (PCI of 2.01).
- Manufacturing and services exports per capita in Guatemala are markedly below comparators such as Costa Rica.

### Determinants of export performance (literature and empirical findings)
- Distance to market and standard gravity equation variables are significantly associated with NHM, manufacturing, and complex exports per capita.
- A Proximity to Markets (PM) index explains about a quarter of the variation in NHM, manufacturing, and complex exports per capita.
- Empirical associations (Salinas, 2021; Ding and Hadzi-Vaskov, 2017; Giri and others, 2019):
  - Increasing schooling attainment by one standard deviation more than doubles NHM, manufacturing, and complex exports.
  - Enhancing governance by one standard deviation increases these exports by about 30-40 percent.
  - Improving infrastructure by one standard deviation increases these exports by about a third.
  - Cutting tariffs from 15 to 5 percent increases these exports by almost half.
- Adding PM and the policy variables can explain up to 80-90 percent of cross-country variation in NHM and complex exports.

### Guatemala’s specific strengths and weaknesses
- Strength: Guatemala’s Proximity to Markets (PM) index is higher than all shown comparators, reflecting geographic advantage including access to North American markets and both ocean basins.
- Weaknesses:
  - Education: Learning Adjusted Years of Schooling are below most comparators, especially Costa Rica and EAEM; both low expected years of schooling and low harmonized test scores contribute.
  - Governance: Low across multiple Worldwide Governance Indicators, notably Political Stability and Absence of Violence, Government Effectiveness, Rule of Law, and Control of Corruption.
  - Infrastructure: Weak on roads, railroads, ports, and airports relative to competitors; poor road infrastructure is particularly detrimental to agricultural exports.
  - Crime: High intentional homicide rate; current rate cited as 22.5 homicides per 100,000 people (down from 45 per 100,000 people in 2009).

### Quantified potential payoffs from reforms (empirical estimates)
- Education:
  - An increase in the United Nations Education Index of one standard deviation is associated with an increase of 150 percent in NHM exports.
  - Matching Costa Rica’s Education Index could increase Guatemala’s complex exports by about 230 percent.
- Governance and crime reduction:
  - Reducing the homicide rate from 22.5 per 100,000 people to the world average of 7 could be associated with an increase in NHM export complexity of 25 percent.
  - Bringing governance standards to Caribbean (CAR) levels could increase Guatemala’s complex exports by 70 percent.
- Infrastructure:
  - Matching East Asian Emerging Markets (EAEM) infrastructure could increase NHM exports per capita by 45 percent.
- Policy variables (aggregate effects noted above): one standard deviation improvements or tariff cuts have substantial multiplicative effects on NHM, manufacturing, and complex exports.

### Policy implications and reform avenues
- Priority horizontal policies to strengthen:
  - Education: raise expected years of schooling and improve learning outcomes to lift Learning Adjusted Years of Schooling.
  - Governance: improve Government Effectiveness and Control of Corruption; address Political Stability and Absence of Violence.
  - Infrastructure: invest in roads, ports, rail, and airports to reduce transport costs, with particular focus on agricultural supply chains.
  - Trade policy: reduce tariff barriers (example: from 15 to 5 percent) to increase NHM and complex exports.
- Crime reduction and public-order reforms can yield meaningful export complexity gains and improve cost competitiveness.
- Reforms targeting these horizontal policies could realistically bring Guatemala’s exports per capita and complexity closer to levels observed in Costa Rica and EAEM countries.

*Source: FOSTERING EXPORT DEVELOPMENT IN GUATEMALA (Prepared by Gonzalo Salinas), May 16, 2022.*

### 20.      Weak logistics exacerbate Guatemala’s

### 20.      Weak logistics exacerbate Guatemala’s infrastructure weakness on export development.

### Logistics and infrastructure constraints
- The World Bank’s Logistics Performance Index points weaknesses for Guatemala relative to East Asian Emerging Markets and peers in Central America, with Guatemala ranking unfavorably to all comparators in: Quality of Customs, Logistics Services Quality, Tracking and Tracing, and Ease of International Shipments.
- The analysis estimated that if Guatemala were to close its governance gap with the world average it would increase its per capita real GDP growth by between 0.2 and 0.8 percentage points.
- The most significant constraints to export development and complexity are identified as: weak governance (particularly related to high crime, low government effectiveness, and weak control of corruption), low access and quality of education, and weak infrastructure (particularly related to roads, railroads, ports, and airports).

### Electricity and household costs
- The average electricity cost to firms in Guatemala is US$0.16 per kWh; this is not significantly different from the cost in other countries near the North American market but is considerably higher than for EAEM countries.
- Electricity costs faced by Guatemalan households exceed those in its comparators and rank 15th highest in the world in 2021.
- Increasing living costs for the labor force have an indirect effect on firms’ costs as households increase their reservation wage, further eroding export competitiveness.

### Labor costs and export competitiveness
- Labor costs for low skilled workers appear particularly high in Guatemala relative to comparators. The minimum wage to GDP per capita ratio (a broad proxy for unit labor costs, especially of formal low skilled workers) is much higher than in comparator regions/countries and is one of the highest among middle income countries.
- Guatemala’s minimum wage relative to GDP per capita is particularly high compared to nearby manufacturing exporters Dominican Republic and Costa Rica, which compete with Guatemala for the North American market.
- Panel Figure A.1. shows a strong negative relation between the minimum wage per capita ratio and per capita exports, consistent with trade-model expectations (for example, Eaton and Kortum (2002)) that high unit labor cost negatively affects export development.

### Export determinants, scenarios, and potential gains
- Guatemala’s export level aligns with its geographic location and four horizontal policy areas: proximity to markets, education attainment, governance, infrastructure, and tariff openness—these predict well Guatemala’s current level of NHM Exports per Capita (based on Salinas (2021)).
- Estimated payoff scenarios:
  - Bringing education, governance, and infrastructure to the levels in Costa Rica would generate a sixfold increase in Guatemala’s total exports and a ninefold increase in its complex exports—allowing Guatemala to match the export per capita level and complexity of Costa Rica and EAEM countries.
  - Improving education, governance, and infrastructure to levels commensurate to its per capita income could enable Guatemala to fivefold increase its total exports and sevenfold increase its complex exports.
- The Guatemalan government is implementing reforms in these areas, including conditional transfers on education, digital transparency, crime reduction, promotion of PPPs for infrastructure development, and is considering Labor reforms on part-time work and minimum wage to better align wages to productivity.

### Characterizing recent inflation dynamics in Guatemala
- Main findings:
  - Inflation rate for the bottom-income quintile has likely been considerably different from the inflation rate facing the top-income quintile in the post-pandemic period.
  - The impact of local food prices in Guatemala appears disconnected from global food prices.
  - Inflation dynamics are mainly driven by local rather than global factors.
- Method and data:
  - CPIs for different income quintiles in Guatemala are proxied using expenditure weights (12 expenditure divisions) employed by the Dominican Republic, applying those weights to Guatemalan CPI expenditure division series (January 2020 = base period).
  - Monthly CPI for each income quintile i in Guatemala is constructed according to the equation provided in the source:
    푪푷푰
    풒풊
    ൌ෍ሺ풘
    풊풋
    ∗
    풙
    풋
    풘
    ଚ
    തതതത
    ሻ∗푪푷푰
    풋,ퟐퟎퟐퟎ
    ퟏퟐ
    풋ୀퟏ
  - Where variables are defined as in the source: 푪푷푰풒풊 (CPI for income quintile i), 풘풊풋 (weight that expenditure division j has for quintile i for Dominican Republic), 풙풋 (weight that expenditure division j has for Guatemalan CPI), 풘ഥ풋 (average weight that expenditure division j has for all quintiles in Dominican Republic), 푪푷푰풋,ퟐퟎퟐퟎ (CPI for expenditure division j in Guatemala with January 2020 base).
- Evolution and heterogeneity:
  - There has been considerable heterogeneity across inflation rates facing different income quintiles. Figure 1 shows annual inflation rates differed markedly since the start of the pandemic, particularly between the bottom-income quintile (q1) and the top-income quintile (q5), with the remaining quintiles in-between.
  - The second half of 2020 saw differences in annual inflation of over 3 percentage points between the poorest and richest quintiles.
  - Three identified phases for q1 vs q5 since the pandemic onset:
    - Phase 1: From outbreak until 2021Q2, bottom-income quintile faced considerably higher inflation than top-income quintile—driven by a decline in fuel prices (more important for top quintile) and higher rise in food prices (more important for bottom quintile) due to natural disasters (Eta and Iota) and pandemic-related food disruptions in 2020.
    - Phase 2: 2021Q2 to 2021Q4, economic recovery reversed the pattern as fuel price rebound and moderation in food prices resulted in higher inflation for top-income quintile relative to bottom-income quintile.
    - Phase 3: Recent months, inflation rates for both quintiles increased amid higher food, fuel, and other prices; the purchasing power of the poorest has declined more relative to the richest quintile.
  - The CPI gap between poorest and richest quintiles widened since the pandemic outbreak, narrowed during 2021, and showed tendency to widen again in the most recent period.
- Explaining the q1–q5 inflation differential:
  - A simple specification tested the role of global food (퐹퐷
    ௧
    ) and fuel prices (퐹퐿
    ௧
    ) in explaining the inflation differential d
    ௧
    :
    푑
    ௧
    ൌ훼൅훽
    ଵ
    퐹퐷
    ௧
    ൅훽
    ଶ
    퐹퐿
    ௧
    ൅
    ௧
  - Regression results (Table 1) deliver two key findings:
    - Higher global fuel prices lead to a lower inflation differential (they affect q5 relatively more than q1). This result is significant at the 1 percent level for Guatemala and all regional peers.
    - Global food prices generally lead to a larger differential for most countries (food matters more for q1 than q5). However, for Guatemala the regression results show the opposite sign: global food prices do not contribute to a larger q1–q5 inflation differential as they do for regional peers.

*Source: IMF country report excerpt.*

### 10.      What could be explaining this seemingly counterintuitive result? One conjecture is that

### 10.      What could be explaining this seemingly counterintuitive result? One conjecture is that

### B. Principal Components Analysis
- Objective:
  - Evaluate hypothesis that global factors are not important drivers of inflation in Guatemala using principal components (PC) analysis.
  - PCs extracted from: overall CPI and twelve inflation divisions in Guatemala; and non-Guatemalan data (US inflation measures and global prices and activity).
  - Data frequency and sample: quarterly data from 2012Q1 to 2022Q1.

- Guatemalan inflation series used (subcomponents listed in source):
  - food and nonalcoholic beverages; alcoholic beverages and tobacco; clothing and footwear; housing, rent water, electricity and gas; household furnishings and equipment; health; transportation; communication; recreation and culture; restaurants and hotels; education; Miscellaneous and other goods and services.

- Key statistical findings:
  - The first three PCs explain around 65 percent of the variation of the 13 quarterly inflation series.
  - Five PCs (with eigenvalues exceeding 1) explain around 85 percent of the variation of the 13 series.
  - In the case of the global series, the four PCs explain around 85 percent of the variation of all of the series.

- Regression framework:
  - Regressions estimated of the form:
    - 푥
      ௧
      =
      훼 +
      ∑
      훽
      ௜
      푃퐶
      ௜,௧
      ௝
      ௡
      ௜ୀଵ
      +
      
      ௧
    - where x is the variable of interest (inflation in Guatemala or elsewhere), and PC stand for principal components extracted with Guatemala data (j=GTM) or non-Guatemalan data (j=*). The number of PCs selected is up to five for PC_GTM, or four for PC*, consistent with Figure 4.

- Interpretation of PCs extracted from Guatemalan data (PC_GTM):
  - The first three PCs largely reflect Guatemala-specific factors: they explain a large variation of CPI and food inflation in Guatemala.
  - These first three PCs do not explain much of the variation of energy-related inflation in Guatemala, or inflation in the US or other global inflationary developments.
  - The next two PCs include global factors (the R2 of US inflation, global oil and food prices increases notably), but they provide only some additional explanatory power for Guatemalan CPI and Guatemalan food inflation.

- Interpretation of PCs extracted from non-Guatemalan (global) data (PC*):
  - Global PCs explain a large share of variation in global variables.
  - Global PCs do not explain much of the variation of Guatemalan inflation variables.
  - Only the first PC is significant in the food and energy equations for Guatemala.

### C. Concluding Remarks
- Quintile-based findings:
  - Proxies for quintile-based inflation rates indicate important differences in inflation rates facing the bottom-income quintile and the top-income quintile of the Guatemalan population since the start of the pandemic.
  - The income-quintile analysis indicated that the impact of global fuel prices on the inter-quintile inflation differential in Guatemala varies considerably from regional peers, suggesting that the impact of local food prices in Guatemala may be disconnected from global food prices.

- Synthesis from PC analysis:
  - Principal components analysis provides further support for the conjecture of a disconnect between global and local price developments in Guatemala.
  - The analysis highlights the prevalence of local rather than global factors in explaining inflation dynamics in Guatemala.

*Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1gtmea2022002.pdf*

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_Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1gtmea2022002.pdf_