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

The displacement is especially serious when considered in the context of Guatemala's very low tax burden (Central Government Current Revenue from Taxes divided by GDP) shown in Table 4. By comparing the government's current revenue with actual spending, it can be seen that Guatemala ran major budget deficits between 1980 and 1985, the same years as there were major increases in military spending (see the Defense column of Table 3). Moreover, Table 4 shows that total government spending (as a percentage of GDP) decreased in the same period as military spending increased at an accelerated rate (1980-1985). Therefore, given the decrease in government revenue already noted, the increase in military spending in relative terms was especially dramatic.

TABLE 4

Defense Expenditures, Current Revenue and Central Government Spending as a Proportion of GDP in Guatemala (%)
Year
Defense spending/ GDP
Central government current revenue/ GDP
Central Government spending/ GDP
1968
1.3
8.5
9.3
1969
1.0
8.7
9.6
1970
1.7
8.7
9.9
1971
1.1
8.7
9.7
1972
1.1
8.8
11.4
1973
0.9
8.3
10.2
1974
0.9
8.9
10.2
1975
1.2
9.0
9.9
1976
1.3
9.3
13.3
1977
1.4
10.8
11.5
1978
1.2
10.9
11.9
1979
1.3
9.7
12.3
1980
1.3
9.5
14.2
1981
1.9
8.7
15.9
1982
2.0
8.4
13.1
1983
2.0
8.2
11.5
1984
2.2
7.0
10.9
1985
2.0
7.7
9.6
1986
1.7
9.2
10.8
1987
1.8
10.5
11.8
1988
1.9
11.2
12.6
1989
1.8
10.2
13.2
1990
1.7
8.2
10.2
1991
1.3
9.1
12.4
1992
1.5
10.6
10.5
1993
1.3
9.0
10.6
1994
1.2
7.7
9.1

Source: see annex

While the tax burden has fluctuated between 7 and 11 percent of GDP, military spending (which has reached up to 2.2 percent of GDP) absorbed almost 30 percent of total tax revenue collected in 1984. Although at first glance Guatemalan military spending does not seem to be very high in terms of GDP (between 1 and 2.2 percent), it is a very significant budgetary burden when compared to the available governmental resources. It is for this reason that social spending suffered so much between 1981 and 1985.

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