World Bank Urges Increased Efforts Against Poverty in Guatemala

February 10, 2009 — On the first day of her visit to Central America, the World Bank´s Vice-President for Latin America and the Caribbean, Pamela Cox, met with Guatemalan President, Álvaro Colom, and presented the Guatemala poverty assessment.

The meeting focused on the country´s situation in the context of the financial crisis that affects the region, while Cox reiterated World Bank support for the government’s efforts to mitigate the impact on the most vulnerable sectors of the population.

Additionally, the official presented the outcomes of a World Bank report according to which Guatemala has achieved major progress in poverty reduction, with poverty rates decreasing by five percentage points over five years. Poverty reduction is a priority to help mitigate the impacts of the financial crisis.

According to the report titled “Guatemala Poverty Assessment: Good Performance at Low Level”, urgent action is needed to protect the most vulnerable groups of the population through social safety programs and promote employment generation policies.

Based on the research, in spite of the progress made between 2000 and 2006, extreme poverty in the country –standing at 15 percent– was not considerably reduced and the reduction that did take place failed to benefit indigenous populations. Guatemala has one of the highest malnutrition rates in the world and the situation could become worse due to the global crisis and higher food prices, the document states.

President Alvaro Colom greets Pamela Cox

“Mostly due to the country´s poor historical legacy, poverty rates and inequality are high and social indicators in health, education and nutrition are low compared to other countries with similar income levels. There are improvements if you compare standards of living in 2000 and 2006, but poverty and inequality levels are very high in absolute terms,” said Pamela Cox, World Bank´s Vice-President for Latin America and the Caribbean, during the report´s presentation.

Progress made but more is needed
Cox stated that Guatemala´s performance has been reasonably good given the resources available. However, she added that still much more must be done. To achieve better outcomes, the country needs more investment, greater institutional capacity and more effective coordination among government agencies.

There are new challenges that make the fight against poverty and inequality even harder, including the global economic downturn and increased crime rates. “These challenges require the implementation of social safety nets, employment generation strategies through infrastructure programs and safety and justice plans as envisaged in the government´s recent economic recovery program,” said Cox.
John Newman, World Bank economist and of the report´s authors, stressed the importance of implementing a fiscal reform in the current context. To face the crisis, Guatemala needs more investments in order to protect the gains achieved and improve the quality of living of the population.

Finance Minister Juan Alberto Fuentes Knight said that the Guatemala poverty assessment “on the one hand makes the poor visible and on the other, it urges us to assume responsibility.”

Fuentes said the ‘Mi Familia Progresa’ program has been allocated US$300 million, or three percent of the budget and less than 0.5 percent of the Gross Domestic Product (GDP). “The recommendations made by the Word Bank in terms of improving targeting efforts are key to ensure sustainability. It is not just about a program that can guarantee that children attend school and get health care. It should be a basic social safety net,” Fuentes stressed.

According to the Country Partnership Strategy with Guatemala, the World Bank has committed resources by US$970 million for the next three years. For the fiscal year ending June 2009, the multilateral agency expects to almost triple its loan portfolio in Latin America, to about US$13 billion, in order to help mitigate the impact of the crisis in the region.
More than US$2 billion are directly allocated to programs in support of the most vulnerable groups of the population with conditional cash transfer (CCT) programs. These programs are aimed at improving access to health and education services.