Caribbean & Central America - January 2025

A 2025 budget which prioritises spending on health, education, and infrastructure projects was published in the official gazette on 9 December after being approved by lawmakers 27 November.

Worth a total Q148.5bn (US$19.25bn), up 27.1% on the 2024 budget in effect, the 2025 budget includes higher assignations for the health, education, infrastructure, and security ministries, in line with policy priorities for President Bernardo Arévalo. Under the new budget, which expects GDP growth to come in at 3.7% in 2025, up from 3.5% for 2024 forecast by the central bank (Banguat), the education ministry will be assigned Q25.6bn (17.3% of the total), up from Q22.5bn in 2024, while health will receive Q15.2bn (10.2% of the total), up from Q12.0bn in 2024.

The government is aiming to improve services for marginalised populations, and Arévalo called the budget “solid and balanced.” For instance, increased spending in the health sector will allow for the construction of more clinics, hospitals, and health centres, as well as more medicines. The idea is to boost development, improving living conditions for the population as well as strengthening democracy and transparency, he added. In a post on social media platform X on 6 December, Arévalo said “no one will be able to stop progress”. The budget’s approval was not certain given that the legislature is largely aligned with the ‘pacto de corruptos’ network of institutional corruption that opposes Arévalo, an anti-corruption reformist.

Guatemalan think tank Instituto Centroamericano de Estudios Fiscales (Icefi) said that the budget prioritises social spending and demonstrates an effort to link spending to the government’s strategic priorities. In a statement published on 9 December, Icefi underlined efforts to make it easier to monitor budget execution as well as the quality of investment as measured by its impact on beneficiaries and other indicators. Icefi also highlighted that the budget contains measures designed to improve transparency and accountability which should help to improve efficiency and control of government entities, such as the regular and timely publishing of data on institutional websites which will be important tools for monitoring.

The 2025 budget also corrects the underestimation of tax receipts which Icefi says has been a feature of budgets since 2021. This underestimation was one reason for the increase to the 2024 budget, which was approved in August at a high political cost, said Icefi. The think tank recommends that the government increase the tax burden in order to secure financing for increased spending on health, education, and security, while maintaining fiscal sustainability. The 2025 budget proposal expects tax take to come in at 11.7% of GDP, in line with forecasts projected by Icefi and the tax authority (SAT) for 2024.

Ensuring that increased social spending can be sustainably funded through taxes may prove difficult for Arévalo given the highly organised opposition that any proposal to increase taxes will likely face from business leaders and economic elites. And the budget itself could face legal issues with Guatemala’s constitutional court (CC), much of which is aligned with the ‘pacto de corruptos’ and which has previously delivered unfavourable rulings to the president, not least in his ongoing power struggle with discredited attorney general María Consuelo Porras [SSR-24-06]. On 10 December, lawmaker Bequer Chocooj of Cabal party submitted legal papers to the court, alleging the budget was illegal and unconstitutional, claiming that the 2025 initiative includes reduced allocations to municipalities, among other objections.

Competition law

On 6 December President Bernardo Arévalo signed a competition law approved by congress the previous month that seeks to guarantee transparent markets and tackle monopolies and corrupt business practices. The legislation, submitted by the Arévalo government, establishes an autonomous competition superintendency which will investigate and sanction anticompetitive practices. The economy minister, Gabriela García, stated that “the competition law is a milestone for the nation, as it promotes the development of a more competitive economic environment, generating great opportunities for opening markets, strengthening institutions, attracting foreign investment, and increasing business productivity”.