Guatemala - Military Spending

Article 30 of the constitution allowed the military to keep the details of its finances secret as a matter of national security. The Guatemalan military faces increasing challenges in operating and maintaining its aging equipment. The Guatemalan military has a modernization plan but no funding to support the plan. The Government of Guatemala [GOG] stipulated that modernization funding must come from either sale of military properties or international donations; neither of these sources has proven to be viable. The Guatemalan military's ability to fully execute counternarcotics and peacekeeping missions will continue to be hindered by a lack of military modernization.

Guatemala's military expenditures (in current United States dollars) increased from US$9.3 million in 1963 to US$61 million in 1979. In percentage of gross national product (GNP) for those years, the figures were 0.74 percent and 0.9 percent, respectively; but in some years the percentage was considerably higher, as in 1970 and 1977 when the figures were 1.6 percent and 1.4 percent, respectively. The estimated military budget for 1983 was US$142.5 million, which was reportedly 62 percent above the previous year.

In 1996 nine main provisions of the civil-military peace accord addressed the reorganization and modernization of the armed forces. The civil-military accord directed a one-third reduction of the military budget by one third as a percentage of GDP by 1999. This measure was complied with, although not without receiving some criticism. Later, under President Portillo, the military budget increased to conflict levels. It was subsequently cut to half the Peace Accord target levels under the Berger Presidency (2004-2008).

During his candidacy, President Portillo had promised to increase the military's role in fighting crime and drug-trafficking. The Portillo administration regularly transferred funds from civilian agencies to enable the armed forces to perform their expanded missions. This augmentation to the military budget caused it to exceed the agreed upon 0.66 percent of GDP limit on defense spending in 2000 (0.83 percent), 2001 (0.96 percent), and thereafter.

The Guatemalan military suffers from an inventory of aging and obsolete equipment in its ground, air, and naval forces. Operational readiness rates for its equipment are very poor due to lack of funding for operations and maintenance. The military also has little funding for procurement of spare parts, which in many cases are expensive or even non-existent because of the age of the equipment. For example, of the six UH-1H and Bell 212 helicopters in the Guatemalan Air Force inventory, only two were operational as of 2006. All three of the Air Force's A-37 ground attack aircraft were grounded due to a lack of parts. The Guatemalan Navy shares some of the Air Force's readiness problems but is even more handicapped by a lack of funds to pay for fuel costs. The lower-tech ground forces are less constrained but the Army's truck fleet is dilapidated because of a lack of spare parts and maintenance funds.

To address these issues, in 2005 the Guatemalan military developed a detailed four-year procurement plan for 1.08 billion quetzales (approximately 144 million dollars). About 85 percent of the spending was destined for mobility purposes (primarily purchase of aircraft and boats) and 4 percent for communications, with remaining funding for expenses not related to purchase of new equipment. For calendar year 2005, the plan proposed the expenditure of 232 million quetzales (approximately 31 million dollars) to purchase six helicopters, four 86-foot boats, a light aircraft, and communications gear. None of this equipment was purchased, however, due to lack of funding.

The Berger Administration agreed in 2004 that the Defense Ministry allocation in the GOG budget should include 0.10 percent of the GDP for military modernization during a four year period to begin in 2005 and end in 2008. In 2006, this would have been approximately $30 million. In principle, funding for military modernization would be derived principally from the sale of Defense Ministry properties and financing through international assistance (i.e. soft loans and donations).

Initial military hopes of gaining funding through the sale of properties quickly dimmed, because the GOG transferred many surplus military properties to municipalities and other government entities, and because of legal controversy surrounding many military properties. An interagency commission determined that the military possessed 442 properties, of which 60 could possibly be sold. However, critics have claimed that, of the 60 properties identified for possible sale, ownership of 50 is in dispute. The Defense Ministry strongly denied this charge, asserting that military properties that belonged to other institutions or individuals have been returned to their rightful owners.

In 2004, the Guatemalan military sought donations of excess defense articles from the German Government. This approach petered out in 2005 for various reasons, including a requirement for Guatemala to pay for transportation costs of surplus equipment and the change in governments in Germany in the fall of 2005. During the same time, a Russian offer to reequip the Guatemalan military on very favorable economic terms drew interest from some quarters of the Guatemalan military, most notably the then commander of the Air Force. Concerns about the apparently too-good-to-be-true financial terms and the bad Russian reputation for maintenance and spare parts support, together with a lack of follow through on the Russian side, led the Russian proposal to fall out of favor with the Guatemalan military.

In order to effectively use scarce defense funding, the Guatemalan military needs more modern platforms that are economical to operate. Without such modernization, the Guatemalan military will be handicapped in efforts to participate in counternarcotics and international peacekeeping operations. Guatemalan military plans to finance at least part of its modernization with reimbursement funding from participation in UN peacekeeping operations were superseded by the need to fund operations expenses in support of the civilian police. Release of $3.2 million in frozen USG MAP funds to buy spare parts and communications gear, along with U.S. donations of excess defense articles will make up some of the shortcomings, but the Guatemalan military will continue to suffer from the constraints of aging and obsolete equipment until it finds an internal or external mechanism for funding replacement of its equipment.

According to the World Bank, military expenditures data from SIPRI are derived from the NATO definition, which includes all current and capital expenditures on the armed forces, including peacekeeping forces; defense ministries and other government agencies engaged in defense projects; paramilitary forces, if these are judged to be trained and equipped for military operations; and military space activities. Such expenditures include military and civil personnel, including retirement pensions of military personnel and social services for personnel; operation and maintenance; procurement; military research and development; and military aid (in the military expenditures of the donor country).

Excluded are civil defense and current expenditures for previous military activities, such as for veterans' benefits, demobilization, conversion, and destruction of weapons. This definition cannot be applied for all countries, however, since that would require much more detailed information than is available about what is included in military budgets and off-budget military expenditure items. (For example, military budgets might or might not cover civil defense, reserves and auxiliary forces, police and paramilitary forces, dual-purpose forces such as military and civilian police, military grants in kind, pensions for military personnel, and social security contributions paid by one part of government to another.)

NATO defines defense expenditure as payments made by a national government specifically to meet the needs of its armed forces or those of Allies. A major component of defense expenditure is payments on Armed Forces financed within the Ministry of Defense (MoD) budget. Armed Forces include Land, Maritime and Air forces as well as Joint formations such as Administration and Command, Special Operations Forces, Medical Service, Logistic Command etc. In view of the differences between the NATO and national definitions, the figures shown may diverge considerably from those which are quoted by national authorities or given in national budgets.

They might also include "Other Forces" like Ministry of Interior troops, border guards, national police forces, customs, gendarmerie, carabinierie, coast guards etc. In such cases, expenditure should be included only in proportion to the forces that are trained in military tactics, are equipped as a military force, can operate under direct military authority in deployed operations, and can, realistically, be deployed outside national territory in support of a military force. Also, expenditure on Other Forces financed through the budgets of ministries other than MoD should be included in defense expenditure.

Pension payments made directly by the government to retired military and civilian employees of military departments should be included regardless of whether these payments are made from the budget of the MoD or other ministries. Expenditures for peacekeeping and humanitarian operations (paid by MoD or other ministries), the destruction of weapons, equipment and ammunition, and the costs associated with inspection and control of equipment destruction are included in defense expenditures.

Research and development (R&D) costs are to be included in defense expenditures. R&D costs should also include those for projects that do not successfully lead to production of equipment. Expenditure for the military component of mixed civilian-military activities is included, but only when this military component can be specifically accounted for or estimated. Financial assistance by one Allied country to another, specifically to support the defense effort of the recipient, should be included in the defense expenditure of the donor country and not in the defense expenditure of the receiving country. War damage payments and spending on civil defense are both excluded from the NATO definition of defense expenditure.