On June 16, general elections were held in Guatemala, where residents of the Central American country voted for a new parliament, city mayors and a new president. Sandra Torres, former Guatemalan first lady, won the first round of the presidential race and her party took the most seats in Congress. The other candidate in the runoff was Alejandro Giammattei, former director of the Guatemalan penitentiary system, and his party got the second place. However, in the August 11 runoff, Giammattei bypassed Torres with a solid margin and on January 14, 2020, he will officially head Guatemala.

The election campaign came amid growing tension over migration issue between the U.S. and Guatemala, which peaked on August 11 runoff.
Sandra Torres, former wife of ex-president Alvaro Colom, promised in her campaign to take the army against gang wars, as well as to expand social programs in poor communities to stop waves of immigrants fleeing north. Alejandro Giammattei, who headed the national penitentiary system, subjected to serious disturbances in 2002-2007, also promised measures to combat crime, as well as the incentive policy for private investment and stimulating annual economic growth up to 6%.

Both candidates criticized the security agreement with the U.S., which could force Guatemala into accepting thousands of immigrants deported from the U.S., mainly from El Salvador and Honduras. If Guatemala neglects the agreement, President Donald Trump threatened to raise export tariffs and cash transfer taxes, which caused the greatest drop in Guatemalan national bonds rate over 14 months. An increased U.S. interest in Guatemalan presidential campaign was shown by the visits of the U.S. Secretary of Homeland Security Kevin McAleenan, who met both candidates a week before the election, and a congressional delegation led by the Speaker Nancy Pelosi on August 8.

Analysts assume that the next administration will have to choose the least evil: either they implement the agreement and try cooperate with the U.S., with the ensuing grave aftermaths in the migration issue, or they reject the deal and potentially face a serious threat to the economy. In 2017, the U.S. provided $ 257 million aid to Guatemala, but the number of immigrants still increased. Over 100,000 people were detained by the U.S. on its southwestern border in June, more than twice as many as the previous year; many of them were Guatemalans. According to some estimates, 70% of Guatemala’s workforce is employed in the illegal sector and most rural residents earn less than the minimum wage of about $ 400 per month.
In the first round, Ms. Torres received 25.5% of the vote, while Mr. Giammattei received 14%, partly because of a crowded list of 19 candidates; none of them got enough votes to avoid the runoff. Polls conducted by Cid Gallup in mid-July showed that Mr. Giammattei was leading with 39.5%, while Ms. Torres was behind with 32.4%. The remaining 22.8% said they would not vote for any of the candidates. Experts also noted that the turnout would be a key factor for Sunday’s election results, as most Torres’s supporters under survey said they would surely vote, while Giammattei’s supporters were less confident in their desire to go to the polling stations. So, low turnout was supposed to play in favor of Torres. Polling stations were open from 7 a.m. to 6 p.m. local time and preliminary results were expected as early as Sunday evening.

Apart from organized crime, an issue, which the authorities have been unable to cope with for decades, financial stability remains critical for the voter. Guatemala’s economy has risen by 3.1% in 2018 and is forecasted to grow by 3-3.8% in 2019, according to the Central Bank. Guatemala’s public debt makes 24% of GDP, which is one of the lowest globally. Remittances, the key driver of the economy, are expected to rise up to $ 10.1 billion this year vs. $ 9.3 billion in 2018.

Both candidates declared they saw an opportunity to increase government spending, but a heterogeneous Congress of 19 parties is unlikely to allow the president to reduce treasury stocks too much. Since no party will have a majority in the 160-seat unicameral Congress, the President will have to seek coalition support. Torres’s party made up the largest congressional bloc in June election (53 seats) and the second largest was Giammattei’s Vamos party (16 seats).

Economists believe that for today’s market conditions, conservative Giammattei is the preferable candidate, while Torres is seen as more wasteful and therefore less friendly to the market. However, a financially conservative congress is well known for its traditionally low budget deficit, the level of public debt is still very low, so the favorable economic growth of up to 6% forecasted by Giammattei is very likely.

The economic measures included in the candidates’ programs, same as the last year, envisaged the budget deficit expansion up to 1.8% of GDP, in line with the IMF recommendation suggested this year. However, back in June, Mr. Giammattei advocated a deficit of 2.5% GDP to accelerate development and reduce poverty. Sergio Recinos, president of the Central Bank of Guatemala, said in August 9 interview that, in his opinion, both candidates would support the country’s conservative macroeconomic policy.

Guatemala’s economy, driven by construction and financial sectors, is expected to increase by 3.4% this year and up to 4% next year, while inflation will stay within the Central Bank’s target of 3-5%, Sergio Recinos said. The government will increase the budget deficit up to 2.1% of GDP this year vs. 1.8% last year. Mr. Recinos believes this measure is necessary for the government to increase social spending. The President of the Central Bank recommended the new administration to implement fiscal reform to increase tax collection up to 10% of GDP and foster development. According to Recinos, the current situation cannot meet Guatemala’s social needs, when the country faces a great challenge to improve social indicators and push further growth.

Poverty and violence that provoke migration from Central America are making the main topic of election rhetoric, as was the case in other countries of the Northern Triangle, El Salvador and Honduras, where the elections have already been held. The primary source of income for numerous gangs is drug trafficking that attracts young people with easy money. While the former first lady Sandra Torres promised to involve the army to combat gangs and drug trafficking, Alejandro Giammattei, as an experienced supervisor of the system dealing with criminals, relied on tougher penalties for illegal possession of firearms.

Referring to the migration issue, Mr. Giammattei said that the government could not yet cope with those already in the country and still less with foreigners. In July, the outgoing Guatemalan government signed an agreement with the U.S. on a safe third country, which could force Guatemala to accept immigrants running northward from all Central America countries. Though the details of this arrangement have not yet been settled, Sergio Recinos said that up to 2,500 immigrants can get asylum in Guatemala annually. They will compete with Guatemalans for jobs, but the economy can absorb them, he said, adding that if their number exceeds 50,000, they could present a problem for the economy.

In July, U.S. President Donald Trump has unwillingly given rise to the Guatemalan economy, when announced his intention to increase taxes and tariffs on remittances to Guatemala. Thus, he provoked panic among immigrants and increasing the amount of cash transfers (to the second largest monthly total) sent to Guatemala. Guatemalans, who live mainly in the U.S., sent home $ 948 million in July, which is 15.8% more than the previous year. This allowed the Central Bank to revise its 2019 forecast for remittances within 9.5-12.5% vs 7.5-10.5% in the earlier version. Low unemployment rate in the U.S. also favored labor migrants.

Two polls published a week before the election showed diverging results. According to the first, Mr. Giammattei wins over Ms. Torres with a solid margin, while the second showed that Torres was slightly ahead*. After voting, the President of Guatemala’s Supreme Electoral Tribunal Julio Solorzano said that the turnout was normal; two polling stations opened later due to minor protests. With the turnout of 62% in the first round, 40% in the runoff came unexpected. This indicates the voter’s interest in the local elections, while the outcome of the presidential race seemed less important because of similar declared goals of both candidates.

Despite the forecasts, Sandra Torres did not benefit from the low turnout; Alejandro Giammattei got ahead (57.95% vs 42.05%) and late Sunday night, Torres’s headquarters acknowledged defeat. Giammattei, 63, succeeded in his fourth attempt for the Presidency of Guatemala. He has been in politics since the 1980s, held various government positions and became well known as director of the Guatemalan penitentiary system in 2006-2008. He was dismissed after being prosecuted for his alleged involvement in extrajudicial executions when several inmates were killed in 2006 during a raid to quell riots at a Guatemalan prison. Following ten months of pre-trial detention, he was acquitted due to lack of evidence.

Giammattei is not a novel person in politics, but his name is not associated with corruption scandals and drug trafficking. The incumbent President, a blunt populist and former comedian Jimmy Morales, who was elected under the slogan “Not corrupt, not a thief”, has been repeatedly involved in corruption cases, including those of his relatives. The main election rival of Morales and Giammattei, Sandra Torres and her party are accused of the illegal campaign financing. To be eligible for the presidential race, Ms. Torres divorced Alvaro Colom, President of Guatemala in 2008-2012. Currently, Colom is under investigation on fraud charges.

Mr. Giammattei can be attributed to the right-wing conservative politicians that are conquering new peaks around the world amid voters’ disillusionment with traditional parties and politicians. His party was founded yet in 2017 and has already won the second place in Congress elections. Mr. Giammattei is more of a businessman than a politician, like his counterpart in the U.S., and the combination of populism and pragmatism increasingly brings success in the elections.