Laws, economic privileges and vice circles

The first one of these goals seems already difficult in a country where privileges have been present since the time of the Spanish Conquest and they prevail. Recent History is a witness of habits turned into laws, as a consequence of past economic models which have been obstacles for a free trade practice and an economy based on free competition.

In addition, the President himself said that for centuries, political power has been used to assure individuals' and group 's privileges, harming the whole population. "To abolish privileges is an indispensable measure on the way to equal opportunities for all" the speech reads. But it's yet unknown how this statement will become a Government policy, without forgetting that the presidential term just started.

When the word "privilege" went public, without precision of its meaning, a particular debate arose among the main actors involved. Each person considered for this interview has its own definition for a word which brings up many interpretations and confusion. Being part of experts' and analysts' vocabulary, it is now part of a much wider universe.

PRIVILEGES IN THE ECONOMY

More than three decades ago, Guatemala adopted a development strategy based on substitutes for imported goods. This measure pretended to increase domestic production to serve a protected regional market. An import licenses and taxes regime was established and high tax rates were to be paid to buy luxury goods while local industry was being protected.

The problem started when it had to be established which imports should or not be considered essential and which industry would be supported, how much tax should be paid and quotes would be defined.

It was difficult for Government officials to have all information available to choose the most convenient measures for the country. But many decisions were made and under protection of the Government. The worst of all consequences was its intervention in the economy. To solve problems more interventions occurred.
The result: a mercantilist economic system which instead of bringing the country out of poverty, established a series of privileges for specific groups, causing more poverty and less opportunities and options.

By the end of the nineteen eighties, an economic model based on exports promotion changed the country's course. Nevertheless, the rules of the game did not change. Guatemala still carries an interventionist economic model , full of rules , centralized , which does not permit development of various economic activities.

In a glance, decisions made by authorities in power seem not to affect free competition but there is more than one example of the vice circles which affect economic activities. Some of these measures include selective consumer taxes, payments for administrative services, exceptions for free trade, compensatory rights, price ranges, quality control regulations, prohibitions for imports and exports, sanitary authorizations and other measures inherited from protected economic models.

PROTECTIONISM VRS. OPEN TRADE

To compete with clear rules, backed by internal policies established by a subsidiary State, which does not interfere in those actions which can be conducted by citizens individually or freely, should not fight with the search for efficiency and competitiveness nationally or internationally, which is most necessary at times when open trade is taking the place of protectionism related to the so called privileges.

Hugo Maul, president of the Centro de Investigaciones Económicas Nacionales (Center for National Economic Research), CIEN, for its abbreviation in Spanish)says that forces which can lead to a more transparent economy , in which privileges disappear on long term basis, can only happen through open trade practices , since "that is the only way to end with the vice circle". One can only preach with examples, and many varied State privileges must be eliminated. The existence of monopolies is a clear example of this situation".

To establish a new economic system is not a one day job, but to establish clear rules for the game, without changing them on the way to the finish line is required, in order to stay alive in the world market. The way the Government and the private productive sectors will define equal opportunities is just the beginning, according to President Arzú's words " the economic situation of Guatemalans will not be solved with speeches but with results".