Complete Thesis_double spaced abstract.pdf

appropriation of state funds to be used by the bank. These funds were then lent to the cattle
farmers and industrialists and the military (Black, 1984, 52). The IPM and the army bank
collaborated with Bank of America to lend themselves millions of state dollars to fund start up
businesses; the development projects included luxury condominiums, parking garages, and
cement companies. The military ventured into lucrative sectors of the economy, using state funds
to compete in sectors where established local companies already existed. The repressive power
exercised by the Guatemalan government, combined with the extensive ties between the military
and corporate interests in Guatemala, was strong enough to hold off challenges by the general
populace and the owners of small to medium sized local businesses for a time; however, in the
early 1980s the Lucas regime tested the balance.
In 1981 while the prices for exports were plummeting, the prices for imports were rising.
Agricultural export commodities, such as coffee and cotton, had dropped in price by 36% and
22%, respectively, in 1981 (Black, 1984, 118). Another of Guatemala’s domestic industries,
tourism, had been damaged by the years of internal conflict. Many of the natural sights, roads,
and buildings had been physically destroyed by the conflict. Also, Guatemala had been labeled a
high risk state by many developed states and travel was discouraged; tourism revenue dropped by
15% in 1980, 35% and 1981 (Handy, 1984, 202). Foreign investors began to pull capital out of
Guatemala while domestic investors channeled their money abroad. The amount of foreign
investment in Guatemala dropped by 900%, between 1976 and 1981 (Handy, 1984, 202). The
military had monopolized the available credit in Guatemala, the middle class and domestic elites
were increasingly cut off from credit and denied opportunities to restructure existing loans.
Decreases in foreign and domestic investment, high inflation, poor access to credit and a decrease
in the demand for exports led to the closing of 3,300 businesses in Guatemala and a
corresponding drop in employment (Jonas, 1991, 82).
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