At the end of the lean season, high prices are reducing household purchasing power

• Long-term debt, lack of savings, and high food and transportation prices continue to strain poor households’ budgets in the Dry Corridor and in affected areas in Alta Verapaz from hurricanes Eta and Iota. The lean season has been more difficult for households in these areas than the rest of the country, as they have depended on food purchases for longer due to these and previous shocks. Income generated from agricultural labor has not been enough to substantially improve household food security, as high food prices and debt payments constrain household income. These households are employing critical coping strategies to cover their food needs and are classified in Crisis (IPC Phase 3).

• At the end of September, most poor and rural households will be able to decrease their reliance on purchasing food from the market thanks to the availability of staple grain harvests. Despite a reduction in local agricultural work compared to normal, the harvest and the opportunity to generate income during the season of peak demand for agricultural labor (October-February) will lead to seasonal improvements in household food and income that is sufficient enough to reduce the proportion of households classified in Crisis (IPC Phase 3). However, they will continue to experience high food and fuel costs that will quickly exhaust newly earned wages. From October through January, the majority of households will likely experience Stressed (IPC Phase 2) outcomes. However, there will still be pockets of population in the Dry Corridor and Alta Verapaz with Crisis (IPC Phase 3) outcomes.

• Despite localized damage and losses caused by excessive rains and floods, staple grain crops from the primera harvest—the only cycle in the Altiplano—are developing adequately. Similarly, seasonal labor demand is favorable, due to high demand for various commercial export crops. This is generating average income levels.

Nationally, economic activity continued to recover in various sectors during the first half of the year. Export values increased 25 percent in the first six months of the year compared to the same period in 2021. Clothing, coffee, edible fats and oils, bananas, and sugar reflect the highest export values. However, cardamom, affected by low international prices, declined 25 percent compared to the value exported in 2021.

In June, the tourism sector received more than twice the number of visitors compared to last year, but this indicator remains 21.6 percent below 2019. The formal sector has also recovered considerably, according to membership data from the Guatemalan Institute of Social Security (IGSS). After the impact of COVID-19 on jobs in 2020, as of May 2022, the total number of members reported by the IGSS exceeded last year’s number (end of 2021) by 5 percent. There has been a rise in economic activity in the services and industries manufacturing sector, while other manufacturing remains similar to 2021. Similarly, monthly salaries show a slight increase compared to previous years. Informal activity is expected to follow the same pattern as formal employment, but this depends on the financial ability of those who lost their jobs in 2020 to acquire and sell products and services. However, there was a less robust recovery among agricultural day laborers, who were sporadically employed to plant staple grains at lower-than-normal levels. The high costs of agricultural inputs and other production costs led farmers to reduce their planted area, with adverse effects on demand for labor.

In July, income from remittances was lower than last month, but similar to last year and higher than in past years. The number of families that receive remittances is highest in the departments of Guatemala, Huehuetenango, and San Marcos. The money is used for household expenses, and while those who receive it are mostly households in the middle wealth group, they typically boost the local economy in their communities through spending, to the benefit of poor households.

Households are currently experiencing the peak of the annual lean season. Rural populations no longer have their own reserves and poor households, both rural and urban, are totally dependent on markets for their food. Since March, the Consumer Price Index has shown continuous monthly increases. In July, food inflation reached 10.4 percent and transportation inflation reached 8.4 percent, the highest positive variations (Figure 1). Region II (Verapaces: Departments of Alta Verapaz and Baja Verapaz) and Region VII (Northwest: Departments of Huehuetenango and Quiché) have shown the highest increases in inflation and even exceed the national level and Region I (Metropolitan).

Food prices are the main driver for the increase in inflation. At the beginning of August, the price of corn and beans remained high. In addition to the impact of the high global cost of foods, major roads were disrupted by the effects of the rains (floods and landslides), as well as by different social demonstrations that blocked some main routes. According to prices monitored by the Ministry of Agriculture, Livestock and Food (MAGA) in July, although the wholesale price of white corn stabilized, it is the highest recorded for the month of July since 2012. Its price was 33 percent and 55 percent higher than last year and the five-year average, respectively. Similar behavior was observed for black beans, which did not show a monthly change, but was 36 percent above the five-year average. However, markets are supplied with national grain reserves from the latest harvests in the north and east of the country, as well as grain from Mexico. As for the prices of subsidized fuel, regular gasoline and diesel decreased slightly, but remain 46 and 64 percent above the five-year average, respectively.

Although national fertilizer prices also stabilized in July following international price trends, they remain considerably high. For example, urea is 125 percent above the five-year average and 96 percent higher than last year. According to key informants, contrary to past years, agro-services, particularly in the interior of the country, maintain limited reserves of agricultural inputs due to a drop in sales and uncertainty about price fluctuations. During the primera season, high fertilizer prices increased production costs, particularly for small and medium producers who forewent hiring external labor. For those who depend on this job, in particular the poorest households, income has been lower than usual given that these sporadic workdays constitute the only possibilities of income generation during this season.

In August, staple grain crops are in different stages of development with adequate growth depending on the geographical area and the variety of seeds used.

Given favorable rainfall during the first rainy season, crops are in good condition. The Normalized Difference Vegetation Index (NDVI, Figure 2) shows above-average values concentrated in areas of the Dry Corridor, the Center, and the Altiplano, and with average and near average values in the rest of the country. In several areas of the south, the first maize harvests began in the middle of the month. In areas of higher altitude, crops are in intermediate reproductive phases, while in the rest of the country crops are observed in flowering or fruiting stages. In targeted areas of southern Alta Verapaz, crop losses have been reported in July and early August due to heavy rains and overflowing rivers.

Overall, the assumptions used to develop FEWS NET’s most likely scenario for the Guatemala June 2022 to January 2023 Food Security Outlook remain unchanged except for the following revision:

• By November, rainfall is forecast to be average, which would reduce the risk of postrera harvest and post-harvest losses.

At the peak of the lean season in August, rural households have resorted to the use of various coping strategies to cover their staple food needs. In the primera season, high prices of fertilizers resulted in a reduction in area planted compared to normal, and this led to reduced demand for labor for activities related to the production of staple grains. The continuation of above-average prices for agricultural inputs will affect the postrera cycle in terms of the amount of fertilizer that farmers can acquire, the total area planted, or the decision to plant at all. In addition to low income levels and high input prices, high prices for food, transportation, and fuel are negatively affecting household purchasing power. Until the harvests begin in September, a large portion of poor rural households will experience Stressed (IPC Phase 2) outcomes. Several rural areas, notably in the Dry Corridor, from east to west, and in areas affected by the impact of past storms from which they have not fully recovered, will be classified as Crisis (IPC Phase 3).

Beginning in October, a seasonal improvement in food availability and access will allow most households that were in Crisis (IPC Phase 3) during the lean season to be Stressed (IPC Phase 2). For those who managed to sow staple grains for the primera and postrera seasons, or during the main cropping season in the Altiplano, rainfall favored crop growth even taking into account a reduction in fertilizer. As a result, most households will have some harvest stocks, thereby alleviating market dependence, even if for a shorter period than normal. At the start of the season of peak labor demand for various commercial crops, households will begin to migrate to large farms that produce coffee, sugar, African palm, fruits, and vegetables, both within the country and in Mexico and Honduras. Agricultural labor demand is expected to be normal given positive export demand so far this year. However, the demand for local labor from small and medium-sized farmers, which is often used by non-migrating households, could be lower than normal due to cutbacks in production costs. Regardless, a relative increase in income during these months will enable households to improve their diet. However, high food and transportation prices will increase household spending and reduce the possibility of saving. In addition, poor households in limited areas of the Dry Corridor and Alta Verapaz that have accrued debt, suffered productive asset losses, and who were also unable to plant crops due to the increase in the price of fertilizers or lost their crops due to excess rains, will continue to face Crisis (IPC Phase 3) outcomes throughout the scenario period. For these households, newly generated income will be marginal, and will only be enough to pay debts and buy minimal food. Therefore, they will continue resorting to the use of coping strategies such as atypical migration, reduced food portions for household members, and the sale of productive assets.