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GUATEMALA: Crisis Hits Local Governments in Pocketbook

Danilo Valladares

GUATEMALA CITY, Jun 16 2009 (IPS) - Incomplete infrastructure works and development projects and dismissals of teachers and municipal employees are some of the consequences of the global economic crisis in rural Guatemala, due to the central government’s decision to cut the budget for the country’s 333 municipal administrations.

With the 125 million dollar budget cut decided in May, the total annual budget for municipal governments this year will be equal to that of 2008 – President Álvaro Colom’s first year in office: around 500 million dollars (compared to a total municipal budget of 405 million dollars in 2007 and 403 million dollars in 2006).

“A highway in the village of Pacomón and several schools in the district of San Sebastián Central will not be built now,” complained Sacapulas Mayor Pedro Pu of the right-wing Guatemalan Republican Front (FRG), the party headed by former dictator Efrain Rios Montt.

Sacapulas is located in Quiché in northwestern Guatemala, one of the provinces hit hardest by the 1960-1996 civil war between the URNG guerrillas and government forces, when the army completely destroyed hundreds of native villages, along with all the inhabitants. Some 200,000 people – mainly Maya Indians – were killed in the armed conflict.

The government of Colom – the country’s first left-leaning leader in over 50 years – cut Pu’s municipal budget by 300,000 dollars, or 30 percent of the total. The Sacapulas city government serves more than 32,000 Quiche Maya people.

“The explanation that they gave us was that it was because of the international economic crisis, but I don’t believe them because they’re giving money to other government institutions that aren’t doing anything,” Pu told IPS.

The government measure is aimed at cutting an 875 million dollar fiscal deficit, which has forced the Colom administration to adopt austerity measures and spending cuts.

Local governments are responsible for meeting the basic needs of people in rural areas, which are home to 72 percent of the country’s 13 million people, half of whom are poor and 17 percent of whom live in extreme poverty, according to United Nations figures.

Indigenous people make up a majority of the population in Guatemala.

Municipal governments are in charge of providing water, sanitation, garbage collection, education and infrastructure. However, much of the rural and poor urban population of this impoverished Central American country lack basic services.

Nearly all local governments are completely dependent on central government funds, because they have few or no other sources of revenue. In Sacapulas, the mayor says he manages to raise around 37,500 dollars a year, or four percent of the annual budget. The rest comes from the central government.

The communities affected by the budget cut are already facing severe difficulties, including a drop in family remittances sent home by Guatemalans living abroad, triggered by the global crisis.

In the first quarter of this year, remittances shrank six percent, compared to the same period last year.

The situation has forced municipal governments to go into debt in order to meet local demands and obligations. “Our government is thinking of taking out a two million quetzal (250,000 dollar) loan to avoid laying off staff or bringing projects to a halt,” town councilor Aura Vargas in the town of Teculután, in the eastern province of Zacapa, told IPS.

“If we don’t go into debt, we would have to lay people off and suspend projects, which would make the economic situation of entire families even worse,” said Vargas, president of the women’s association in the municipal government, dedicated to fomenting women’s participation in local politics.

Other municipalities, like the tourist city of Antigua Guatemala in the south, known for its colonial architecture, had no choice. “Between yesterday and today we had to lay off 20 workers and we are also suspending work on five high priority public works projects,” Mayor Adolfo Vivar said on Jun. 9.

“They cut our budget by 1.2 million quetzals (150,000 dollars), and that obviously has caused us problems in terms of spending and functioning,” Vivar, of Colom’s left-wing National Union of Hope (UNE), told IPS.

However, he said the central government had no alternative, in the face of the world economic crisis.

Jocotán, in the southeastern province of Chiquimula near the Honduran border, is facing a similar situation. “We are considered one of the poorest municipalities in the Chortí Maya region in eastern Guatemala, and we were surprised when our funds were cut, but we pressured the government and they gave part of it back,” Mayor Ramón Díaz told IPS.

But what his government has recovered is not enough, and the administration will have to lay off teachers. “They were budgeted until October, but under these circumstances we will only be able to pay them up to August,” lamented Díaz, of the FRG.

The situation highlights the need to strengthen the municipal government’s own sources of revenue and to decentralise the public administration.

Their heavy dependence on the central government means local administrations do not have the power to create new taxes, which only the legislature can do.

With the aim of changing this, the national association of municipal governments and the Guatemalan association of mayors and indigenous authorities (AGAAI) have proposed a draft municipal tax code, which would enable local governments to levy municipal taxes or taxes on the use of publicity, or on commercial and professional activities, for example.

They have also recommended several reforms to the municipal code, in order to make the contributions they receive from the central government more fair and equitable.

But so far, there has been no positive response from parliament.

“There has been a lack of political will on the part of Congress to approve these initiatives,” Carlos Guárquez, executive coordinator of AGAAI, told IPS. “Moreover, some sectors in the country would not benefit from the collection of local taxes by municipal governments, but it is indispensable for achieving local development.”

Rigoberto Quemé, the president of the non-governmental Munikat Institute, which advocates the strengthening of local government, complained that many factories bring no benefits to municipalities, or even cause harm, by dumping waste in the rivers, for instance.

The adoption of a municipal tax code is also important for that reason, he told IPS, because it would make it possible to sustainably increase the local governments’ own funds to deal with problems like pollution. Because “the municipal government is seen as a kind of Cinderella – no one wants to give it anything, and if they do, there are conditions and strings attached,” he told IPS.