Caribbean & Central America - January 2026

While in November 2025, Guatemalan lawmakers approved a budget for 2026 which dedicates more resources to infrastructure projects such as road building and schools, its implementation was suspended by the country’s constitutional court (CC) in a decision published on 30 December.

The budget approved by legislators on 26 November is worth a total Q163.5bn (US$21.33bn), up Q8.7bn compared to the 2025 budget, with more spending dedicated to social development, such as a new police hospital in Guatemala City, as well as the construction of a new prison designed to alleviate overcrowding following an embarrassing prison break in late 2025. It also assigns Q900m to electricity subsidies and Q107m to reparations for communities affected by the construction of the Chixoy hydroelectric dam in Baja Verapaz department as well as programmes such as a development fund for indigenous communities (Fodigua), reflecting President Bernardo Arévalo’s leftist-reformist tendencies. 

Finance Minister Jonathan Menkos hailed the decision to approve the budget in a statement published 28 November, underlining that the final document was “very similar” to the draft sent to congress by Arévalo and that it had been analysed in a “transparent” process. 

However, a month later, the CC suspended its implementation after receiving legal challenges citing alleged procedural issues. Following the CC’s decision, the government announced that it would revert to the 2025 budget. This process has happened before – most recently in 2023 - and the 2025 budget itself had been amended by various modifications last year, bringing spending up from Q148.5bn [EB-25-01] to Q154.8bn.

• Other CC interventions

The CC has previously moved against other budgets – most recently in December 2023 when it vetoed the state budget for 2024 under the previous government led by former president Alejandro Giammattei (2020-2024). This followed multiple concerns from various sectors, including then president-elect Arévalo, ranging from doubts over transparency to the failure to meet basic norms.

Looking ahead, the suspension of the 2026 budget will not affect the day-to-day running of government, but it will prevent President Arévalo from moving ahead with significant development projects that would further his agenda. For example, it limits the creation or expansion of social programmes and investment projects.

While following the CC’s decision, the Arévalo government said that it would present a new initiative before congress, modifying the current budget to adapt it to “economic, social and institutional challenges” relevant to 2026 and government targets, it nonetheless reflects the latest challenge to Arévalo’s reformist efforts. These have also been held back by a legislative majority committed to curtailing public spending and opposing his agenda, as well as continued conflict with Attorney General María Consuelo Porras and the so-called ‘pacto de corruptos’ network of institutional corruption.

Other criticisms

In a 26 November statement, regional think tank Instituto Centroamericano de Estudios Fiscales (Icefi) flagged familiar concerns around the budget and its methodology, particularly in designating Q6.3bn to regional development funds known as Codedes. Icefi alleges that the distribution of these funds has no technical basis and “could follow party political interests”.

Icefi also highlighted among other concerns, the lack of transparency regarding funds assigned to NGOs. It notes that the 2026 budget includes contributions amounting to Q2.5bn for 158 entities, most of which were NGOs, which it describes as a mixture of “well-known prestigious organisations and others whose origins and capacities are unknown”.  

Minimum wage to increase by up to 7.5% in 2026

On 18 December President Arévalo ordered that the minimum wage increase by as much as 7.5% in 2026. Non-agricultural workers will receive the largest rise, taking their monthly wage to Q4,252, while agricultural workers stand to earn 5.5% more, equivalent to a minimum of Q4,041 per month. Those that work in textile factories known as maquilas will receive 4% more pay, with a new minimum monthly wage of Q3,659.

This follows an increase of as much as 10% last year, which the government said “generated positive effects on employment” and led to a 4.7% increase in social security membership. This means that Guatemala’s high rate of labour informality, which stands at around 70%, is decreasing as the minimum wage increases. “I have taken this decision with our priority in mind: to guarantee better pay for dignified work,” said President Arévalo.

The wage rise is significantly above the country’s inflation rate which closed 2025 at 1.65%, down from 1.70% in December 2024.