NEWTOWN, Conn. - Guatemala's military is tasked primarily with protecting the nation's borders and fighting transnational criminal groups and drug traffickers. In recent years, the military has increased its focus on border protection and is handing maintenance of order in cities and towns to the national police.

Defense spending has not risen in accordance with the military's major roles over the past five years. The 1996 Peace Accords between the government and rebels prevented defense spending from rising above 0.66 percent of GDP. Furthermore, the government limited defense spending to 0.34 percent of GDP during the 2000s. This 0.34 percent limit has since been repealed, and defense spending climbed between 2009 and 2013, jumping 21.7 percent in 2011 and 23.1 percent in 2013. However, increases of that magnitude were not sustainable and defense spending stabilized between 2013 and 2016 and declined by 7.4 percent in 2017. In real terms, declines were an even more substantial 11.4 percent between 2016 and 2017.

However, as threats continue, the government is now planning to increase spending. In 2018, the government has proposed a GTQ2.2 billion ($305.7 million) budget, representing a 17.8 percent increase compared to 2017.

Personnel expenses make up the largest portion of spending for Guatemala's Ministry of Defense, accounting for 66.4 percent of all spending in 2017. It is expected to climb to 69.7 percent in 2018. Together, personnel, administration, and materials make up 86.1 percent of Guatemala's budget in 2017, leaving only 4.2 percent left to purchase equipment. That figure is expected to decline to 1.2 percent in 2018.

Going forward, defense spending in Guatemala is expected to rise at a faster rate than in the recent past. Between 2019 and 2023, defense spending is expected to increase at an annualized rate of 4.9 percent. Multiple factors will support defense-spending growth. For one, Guatemala's economy is expected to steadily improve through the rest of this decade and into the early 2020s. Growing GDP will give the government access to more resources. Furthermore, continued threats from transnational criminal groups will require the government to respond with additional troops and improved equipment. Finally, years of non-increases will force the government to catch up as wages continue to grow and crowd out spending on equipment.

Source: Forecast International
Associated URL: www.forecastinternational.com
Author: B. Ostrove, Analyst