1940: Guatemala

The finances of Guatemala are in a sound condition, with the quetzal on a par with the U. S. dollar, gold reserves strong, and a balanced budget, estimated for 1940-41 at 10,258,000 quetzales. President Jorge Ubico's methods of securing this result work a disadvantage to the masses, however, and, in part, account for the abortive revolt late in December, led by Julio Marín, head of the Unionist Party. Little is spent on public education or public health, and the heavily mortgaged coffee industry is threatened with bankruptcy by low prices and the high export tax on that commodity. Coffee forms 50 to 60 per cent of total Guatemalan exports. The loss of the European market, which normally absorbed about 45 per cent of the Republic's coffee, has resulted in a relatively large coffee surplus and has led to a general reduction in foreign trade in the first nine months of 1940, when export values shrank to $11,914,000 as compared with $13,150,400 in the corresponding period of 1939. Guatemala has accepted the coffee quota of 535,000 bags assigned it in the United States market (see EL SALVADOR). In the past ten years the United States has steadily increased its purchases of Guatemalan coffee, and about 70 per cent of the 1939-40 crop went to the North American republic. Banana exports are about one-third lower than in 1939, but expanded production, because of the successful operation of new Pacific coast properties, has about doubled the output in the past five years. The money spent in this development has provided much needed foreign exchange.

In view of Great Britain's present difficulties, President Ubico has suspended efforts to reincorporate British Honduras (Belize) with Guatemala until a more appropriate time. This dispute dates back to the Convention of 1859 whereby, in exchange for British sovereignty over the contested area, Great Britain promised to cooperate in establishing communications between Guatemala City and the Caribbean coast. A study of the proposed highway convinced Britain that the cost was prohibitive, but Guatemala has insisted on compensation for the unfulfilled commitment. Arbitration negotiations in 1937 bogged down over the choice of an arbitrator. The latest arbitral proposals, originating with Great Britain, agree on an arbitral board of three, one chosen by each of the disputants and the third by President Roosevelt.

A new development in Mexican-Guatemalan relations was indicated in the spring when President Cárdenas, at the Guatemalan border, asserted that the two countries enjoyed a profound friendship based on mutual interests, in spite of the fact that the highly conservative government of Guatemala, now in its tenth year in power, has always been suspicious of the revolutionary administration in Mexico.