The Region's Blue Chip Investment

In the eyes of a Guatemalan labor leader who recently went under ground after an army death squad came calling at his home, 1981 will be grim. "This will be the year of poverty and hunger for Guatemala," he says.

A Bank of America executive, who recently increased his Guatemalan lending capital as a show of confidence in the country's future, has another view. "The economy is very, very strong at this point," says Keith Parker. "This year should be excellent. If we as a bank were looking to lend money to a government, if we looked at it strictly on the numbers, Guatemala would be Al, before any other Latin country."

These men are looking at the two faces of Central America's largest economy (1980 GDP in excess of S7 billion). After decades of U.S. intervention and domination, Guatemala has emerged as a classic case of dependent development. The economy is doing well by conventional business standards. There is a diversified and cosmopolitan oligarchy, a thriving multinational sector with more than 200 U.S. firms, and - for the majority of the population - some of the most abject poverty in the Western hemisphere. '

The 1954 coup (instigated by United Fruit Company and implemented by the CIA), which overthrew the elected reformist government of Jacobo Arbenz, cast the die for the next 27 years of Guatemalan politics and economic development. The structural underpinnings of today's Guatemala -inequitable land distribution, reliance on export agriculture, extensive penetration by multinational capital, and repressive, military-oligarchic government-were locked in place and insulated from democratic challenge by the post-Arbenz regimes.

According to the most recent Guatemalan census, two percent of the population owns 65 percent of the land. On the large estates, 60 percent of the land lies fallow. Roughly two thirds of the population earns its living by working on the land as permanent or temporary farm labor on the large estates or as owners of "subsistence" plots of 2.5 acres or less. In recent years, many such plots have been expropriated by large growers and military officers. Each year more than 500,000 peasants unable to find work in the highlands migrate in search of seasonal work on coastal plantations. Guatemala's population is 7 million.

Guatemalan farmland is primarily devoted to export cash crops, led by coffee, which accounts for 36 percent of export income, as well as cotton, sugar cane, cardamom, beef and bananas. Guatemala has recently joined Brazil as Latin America's only exporters of natural rubber, a commodity whose market is expected to grow as oil prices drive up the cost of synthetic rubber.

The agro-export base is supplemented by an industrial sector which grew at 9 percent per year through the late 70s and now employs 20 percent of the Guatemalan workforce. Industry is dominated by low technology, low-wage producers of consumer goods for the working and middle classes of Guatemala and Central America. There are, however, not enough jobs to absorb the agricultural labor surplus, resulting in an estimated unemployment rate of 20 percent coupled with 50 percent underemployment.

As an open economy whose external trade equals half of its Gross Domestic Product, Guatemala is tied to swings in the world market. Thirty percent of its trade is with the United States. In 1979 and '80 the U.S. recession hit Guatemala hard, pulling down GDP growth rates, which had been running around a vigorous 5 percent, and pushing inflation, which had been running at a rate lower than that of the U.S. and far lower than most Latin countries, above I S percent.

Guatemalan exports also 'suffered when the country's second largest trading partner, the nations of the tariff-protected Central American Common Market, imported fewer ,goods due to the revolutions in Nicaragua and El Salvador. Guatemala has always enjoyed a large balance of trade surplus in its dealings with its less industrially developed Central American neighbors.

Tourism, which in good years has been the country's third largest source of foreign exchange, dropped precipitously in 1980 and '81 due to international publicity about the government's political repression. which claims the lives of 30 to 4C peasants, workers, clerics and politicians each day.

But despite these external shocks. multinational bankers and executives agree that Guatemala is still a sound and profitable place to invest The main export commodities are expected to draw good prices in the coming year, the economy's reaction to the recession was much milder than that of many Third World countries_ foreign exchange reserves are strong, and both the public and private sectors enjoy one of the lowest external debt ratios in Latin America. Oliver Sause, executive director of the American Chamber of Commerce in Guatemala. claims that "Guatemala has so many resources going for it that it is possible that it could ride out a major political. onslaught."

Any onslaught against the Guatemalan oligarchy would also be an attack on some of the world's most powerful multinationals. For unlike El Salvador, where the United States' direct economic interests are minor, Guatemala represents a $400 million U.S. export market and has direct investments to the value of at least $300 million-a figure which is sure to grow as oil development picks up (see adjoining article).

The multinational presence in Guatemala has diversified considerably since the days when United Fruit ran the country like a corporate fiefdom. Perhaps the most powerful firm in Guatemala today is Bank of America, which is surpassed only by the government as a source of agricultural capital. Due to government restrictions on local banks, Bank of America is also the only institution in the country permitted to make loans in excess of SS million, giving it the inside track on all major projects. As the principal founder of the Latin American Agribusiness Development Corp. (LAAD), Bank of America also helps direct the country's main source of venture capital for "non-traditional export enterprises."

In addition, the bank is a potent behind-the-scenes political force. It is the only corporate member of the Amigos del Pais,. a right wing Guatemalan business group which lobbies for U.S. weapons sales to Guatemala and pays the public relations firm of Michael Deaver, President Reagan's closest personal adviser, a $13,000/month retainer. Bank of America has many of the country's most powerful landowners, industrialists and military men among its clients, including the nation's president, General Fernando Romeo Lucas Garcia, to whom the bank extended a personal loan to purchase his 7,000-acre cattle estate in the oil-rich Northern Transversal Strip.

The largest industrial enterprise in Guatemala is the EXMIBAL nickel mine owned by International Nickel of Canada (80 percent) and Hanna Mining of Cleveland (20 percent). When plans for the mine were announced in the late '60s, massive public protest led to the establishment of a public commission of inquiry. Two of the three commissioners were assassinated; one of them, a paraplegic congressman, was machine-gunned in the back as he left the Congress in a wheel chair. The mine was approved, on terms favorable to EXMIBAL, and a mining code, drafted by EXMIBAL executives, was enacted to regulate its operations. This January the mine was shut down for a year due to low nickel prices and the high cost of oil used in the smelting process. At its peak, the mine brought in roughly as much foreign exchange as the entire tourism industry.

With the exception of Goodyear, which owns rubber plantations and a tire factory, and Del Monte, which owns old United Fruit banana estates employing more than 10.000 workers, most of the multinationals in Guatemala are U.S. manufacturing plants which produce for the Central American market and employ 100-250 workers. These firms include Riviana Foods, Weyerhaeuser, Philip Morris, Colgate-Palmolive, U.S. Steel. Richardson-Merrell, Warner-Lambert and American Standard.

The Guatemalan government is known for its eagerness to cooperate with foreign investors, and the community of U.S. and Guatemalan businessmen is perhaps the most tightly integrated economically, socially and politically in all of Latin America. Joint ventures, intermarriages and political collaboration through the American Chamber of Commerce (which has dozens of Guatemalan members) and the Amigos del Pais (which has many U.S. members) are the rule for local and foreign members of Guatemala's ruling elite. Unlike the situation in many dependent economies, Guatemalan and U.S. investors have avoided fundamental clashes o1 interest. The government does not regulate the financial operations of multinationals, and helps them suppress labor agitation. The multinationals honor the turf of local monopolies held by old Guatemalan families (e.g., the Novellas control cement, the Castillos beer and glass), are generous with local stock participation, and defend the Guatemalan military regime in the U.S. political arena.

While the oligarchy and the multinationals have prospered together, the population that does their work has been literally fighting for survival. Even Sause of the American Chamber of Commerce admits that "Guatemala has in the past been guilty of the crimes of repressing the peasants, failure to provide social development for the poor, failure to provide opportunity." Sause contends this is changing, but virtually every available indicator of peasant and worker living standards suggest that while changes have indeed taken place since President Lucas Garcia assumed office in 1978, they have overwhelmingly been for the worse.

Urban workers, generally thought of as the most "privileged" popular sector, have been subjected to an unprecedented campaign of government terror aimed at destroying unions which press demands for improved wages and working conditions. One-hundred and ten labor leaders were assassinated in 1980-roughly two per week. The rate has increased in 1981. Guatemalan and multinational manufacturers, responding to the recession by seeking to cut wage costs, have been laying off their work force en masse, then rehiring temporary workers who will again be laid off in a few months. In this way, companies such as Alimentos Kern, a Riviana Foods subsidiary and a notorious practitioner of the layoff gambit, keep their workers at the lowest salary grades, preventing them from moving up the pay scale provided by the national labor code, and discouraging union organization. Unlike more capital-intensive investments in countries such as Puerto Rico, manufacturing multinationals in Guatemala are concentrated in low wage, labor-intensive industries. They depend on the country's depressed wage structure-where daily industrial wages range from $2.50 to $4.50-for their profitability. .

Since the mid 1960s wages have failed to keep pace with inflation. This is a serious problem for a workforce that was living near subsistence to begin with. It is a critical one for the rural campesinos, many of whom have simultaneously been confronted with loss of their homes and jobs through eviction from large estates and unclaimed land; exploitation by "contrabandistas" who hire groups of temporary female coffee pickers and often pay them less than half the minimum wage; occasional deduction of wages by large growers such as millionaire Roberto Alejos of the El Salto sugar cane plantations; and systematic spraying of toxic pesticides on fields filled with workers.

In 1964 the Nutrition Institute of Central America and Panama (INCAP) estimated that subsistence food, clothing, shelter and transportation needs for a family of five would require a "vital minimum wage" of $7.00 per day. By 1979 the vital minimum had risen to $9.10 per day. Yet according to. the National Workers Confederation (CNT) -the umbrella organization for Guatemalan unions-the average daily wage covered only 3 percent of this subsistence requirement. The 1981 average wage is not enough to cover the 1964 vital minimum.

Given such a wage structure, full time child labor, often beginning at age seven or eight, is near universal in rural Guatemala. Families are often split when fathers or mothers leave home for months at a time to look for work-. Guatemalan infant mortality, according to the government's preliminary census last November, has surpassed that of Haiti; 56 percent of children die before the age of five.

Starvation wages are nothing new for Guatemalan peasants. What has made 1981 particularly trying has been the inflation of the prices of basic foodstuffs and rural transportation. Corn, sugar, and liver have doubled in price; in some areas, black beans have tripled. Because of the headlong development of export cash crops, cultivation of subsistence food has been neglected. Guatemala has had to import much of the corn and beans which, in meager proportions, keep its rural population alive.

A crisis of rural misery would pose little threat to the Guatemalan economic system which has precipitated and survived many such crises before. But with the revolutions in Nicaragua and El Salvador and the slowly growing strength of the Guatemalan guerrilla movement which has sunk deep roots among the Indian population, the ruling elite will have to respond. The options are to ameliorate the crisis or to repress those who seek to give it political content. The first solution would require redistribution of income, restructuring of the economic system, or a massive infusion of outside capital-none of which are in prospect. The Guatemalan oligarchy, supported by multinational corporations, has instead chosen the strategy of repression, to be carried out by the military-dominated government.

There are, to be sure, sources of friction between the government and the business elites. Multinational executives seeking contracts for government public works projects are complaining about skyrocketing bribery rates and cavalier treatment which is out of keeping with the nation's traditional subservience to U.S. capital.. Corruptiono which extends beyond routine pillage of the public treasury has aroused the ire of numerous businessmen; last year's . coffee harvest was hurt when government officials stole funds earmarked for a coffee-fungus prevention program.

The economic prognosis for Guatemala, like everything else in that country, varies by class. For the masses of agricultural and urban workers, the self-perpetuating post-1954 regime of army officers, ruling on behalf of local barons and multinational executives, offers no economic hope and considerable physical peril. For the corporate economy, the key factors in the economic future are world commodity prices, and the degree to which the Reagan administration succeeds in restoring business-as-usual to the Central American Common Market. The essential requirement is that the army's strategy' of repression continues to prevent ' foreign and even Guatemalan capital from fleeing the country.

Guatemalan businessmen express a fervent desire to stay and fight for the privileges of their class. American firms, while calling the families of some U.S. executives back to the States, have stopped short of disinvestment. Some, such as Bank of America, have increased their Guatemalan exposure, especially since the Reagan victory. The American Chamber of Commerce continues to enthusiastically back the Lucas regime in lobbying on Capitol Hill and through cash contributions to the Guatemalan government's extensive international public relations campaign.

In its moment of impending political conflagration, the full spectrum of Guatemala's dependent economy stands strikingly on display. Peasants starve in the hills and priests are cut down in the streets, but Guatemala remains a "good place to do business."

Allan Nairn is a free-lance writer based in New York.