April 23, 2003


Guatemala at the Crossroads: The Future of Free Market Reforms (Anthony B. Bradley, April 23, 2003, Acton Commentary)
Prior to the administration of the country's present leader, Guatemala underwent significant economic and political development. Under the leadership of President Alfonso Portillo, however, the country has experienced a sharp reversal of many of the pre-1999 free-market reforms. The Portillo Administration's enactment of higher taxes and its cavalier treatment of the rule of law have stymied the nation's economic development.

These conditions have brought about a renewed interest in the free-market reforms that characterized government policy in the 1990s. The March conferences in which I participated were designed to bring together some of Guatemala's "best and brightest" to discuss the future of free market reforms and, by extension, the very future of Guatemala itself. The fundamental conviction of all the sponsoring organizations is that the future of Guatemala lies not with a centralized federal structure dictating economic policy, but with the economic and moral components of a revitalized civil society working in concert for the economic development of Guatemala.

Rodrigo Callejas, an attorney from Guatemala City and one of the conference organizers, provides critical insight into the changes necessary to unlock the economic and political potential of Guatemala. Callejas notes that, for Guatemala to have continued economic growth, "a national dialogue has to be set in order for all sectors of Guatemalan society to agree upon a long-term national vision, based upon a stable legal framework, rule of law, a democratic government, and a socially-aware free market economic system."

However, like other countries in the region, the desired free-market "culture" needed for long-term, systemic change in Guatemala has been deterred by an overbearing and unwieldy federal structure. This structure has made Guatemala, especially in the perception of most investors, a very unfriendly place for business. Significant structural reforms are needed-and needed immediately-if Guatemala is to survive and be competitive in the international marketplace. Callejas is convinced that new growth will ensue when Guatemala's assets are capitalized and when there is "a single tributary scheme that will motivate investors and provide them with the stability for their investments."

Perhaps such a possibility looms more imminently than one imagines, since federal elections are scheduled for November. The next generation of Guatemala's leaders, like Callejas, want to improve economic conditions by seeking "to take away the overwhelming power that the government actually has, and decentralize it to the civil society." A new vision for Guatemala is needed, continues Callejas, where " the government has to understand that its role is to serve . . . and respond to the needs of entrepreneurs in a just and efficient way."

His is not a lone voice. Organizations such as IPRES explore and disseminate the dynamic relationship between ethics, social responsibility, and the institutions of the free-market. A fundamental principle of The Instituto de Gobernanza is to promote the principles of limited government and respect for the autonomy of civil society.

Not to be trite, but it seems possible it may be less important for a nation to embrace capitalism than social capitalism. Posted by Orrin Judd at April 23, 2003 9:14 PM
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