Military Spending in Guatemala: The Fiscal and Microeconomic Impact: 1969-1995 Thomas Scheetz

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Estimating the displacement of social spending is crucial in a country like Guatemala, whose social development indices are notoriously low (see Table 1). The human poverty index, determined by the United Nations Development Program, places Guatemala at a level similar to India, Zambia and Rwanda.

TABLE 1

Some social indices in Guatemala in the 1990s
(figures in all columns are %)

Illiteracy rate	Population without access to potable water	Population without access to health services	Children under five years of age with low weight	Human Poverty Index
1994	1990-96	1990-95	1990-96	1997
44.3	36	43	27	35.5

Source: see annex

Tables 2 and 3 denote the evolution of the phenomenon of spending displacement (commonly termed "crowd-out") during a period of 27 years.

The first estimation demonstrates the evolution in real terms (eliminating increases due to inflation) of military spending in Guatemala. It shows a dramatic increase during the second half of the 1970s followed by a leveling off or a moderate decrease. Despite a decrease in the 1980s, the level of military spending in the mid-1990s was more than double that reached at the end of the 1960s. Between 1971 and 1974 defense spending averaged 21.2 million quetzales, which multiplied almost three times between 1981 and 1984, reaching an average of 59.4 million quetzales. From 1991 to 1994, this figure decreased to an average of 48.6 million quetzales, though that figure is still much higher than the average at the end of the 1960s and the first half of the 1970s.

TABLE 2

Real growth of military expenditures in Guatemala

Year	Defense Expenditures (Millions of 1968 real quetzales)*	Growth rate of military expenditures (%)
1968	20.5	n/a
1969	17.3	-15.3
1970	30.4	74.9
1971	21.1	-30.5
1972	23.2	9.8
1973	19.7	-14.9
1974	20.7	4.9
1975	28.9	39.8
1976	32.1	11.0
1977	37.3	16.3
1978	33.7	-9.6
1979	39.1	15.7
1980	40.9	5.6
1981	59.1	44.4
1982	61.1	3.4
1983	56.0	-8.3
1984	61.3	9.5
1985	58.9	-3.9
1986	49.0	-16.8
1987	53.3	8.7
1988	59.1	10.8
1989	59.3	0.3
1990	58.6	-1.1
1991	44.4	-24.2
1992	54.2	22.0
1993	48.9	-9.8
1994	47.0	-3.8

*The figures are adjusted for inflation.
Source: see annex

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