Can democracy rebound in Guatemala after a tumultuous election? On January 15, nine hours after a stubborn delay by the outgoing Congress, the presidential sash was finally bestowed upon President Bernardo Arevalo. Yet, the road ahead for the Arevalo administration is fraught with challenges of pervasive corruption (three days after leaving office, former President Giammattei was sanctioned under the Magnitsky Act), deep-seated political instability, and looming economic uncertainties. President Arevalo’s inauguration represents a fragile victory rather than a conclusive win. For Guatemala, January 15 marks not an end but a new chapter where sustained U.S. support is imperative. The question is, what should its role be? 

President Arevalo inherits a Guatemala that is divided between two realities:  a nation that has become a case study of deeply entrenched corruption—most starkly symbolized by the rise and subsequent fall of the United Nations-backed anti-graft body CICIG—yet also a country where the resilience of its institutions and citizens is impressive. With over half of the population living in poverty and working in the informal sector, Guatemala is among the most unequal countries in the Americas. 

President Arevalo has recognized these challenges, set forth a comprehensive agenda to incorporate Guatemalans into the formal economic sector, and pledged to undertake significant measures to eliminate poverty and enhance education. But he will face substantial headwinds in the financial sphere: the World Bank estimates the growth of the $95 billion economy to decelerated at 3.7 percent in 2023, down from 2022’s 4.1 percent growth rate. To combat corruption, he pledged earlier last year to convene an autonomous national anti-corruption commission, whose job will be to build nationwide anti-corruption mechanisms and strategies to monitor the executive branch. 

President Arevalo and his party must also maneuver continued domestic challenges to advance his ambitious agenda. On Sunday, Movimiento Semilla, Arevalo’s political party, secured a one-year Presidency of the Congress. However, by Wednesday, January 17, the Constitutional Court—who most recently ruled to overturn Movimiento Semilla’s suspension—issued a statement calling for an immediate repeat election of the Congressional Board of Directors and reverting all of the legislative actions thus far. President Arevalo’s success hinges significantly on the sustained engagement of the international community, particularly the United States. 

Why is Washington’s continued engagement so critical? First, attempts to undermine and disrupt the rule of law in Guatemala are ongoing. These efforts, led by powerful political opposition factions resistant to change, are a significant threat to the stability of Arevalo’s administration. The Constitutional Court’s recent demand is a perfect example. It underscores the need for vigilant international support, especially from the United States, to bolster Guatemala’s institutional resilience against such disruptive forces. Washington’s engagement is crucial in providing diplomatic backing and aiding the development of governance structures that can withstand internal pressures and uphold democracy.

Secondly, the global implications are high. Guatemala is at the center of a geopolitical crossroads between China and Taiwan. The president has already said he plans to build closer ties with China without dropping Taiwan. But how much will China yield without the ultimate diplomatic display of rapprochement? Should Taiwan’s most significant ally pivot to China, the latter’s influence in the Americas would be substantially bolstered on all fronts, economically, commercially, diplomatically, and militarily. The role of the United States in this next phase for Guatemala—and the region—extends beyond a simple geopolitical chess game. There is an urgent need for a balanced approach by the United States that continues to support democratic processes and values, fosters economic and commercial engagement, and respects Guatemala’s sovereignty. 

There are additional strategic economic and commercial benefits of continued involvement for the United States. Specifically, continued engagement on the nearshoring front could bring about various benefits for both countries. U.S. businesses can tap into economic opportunities by establishing operations in Guatemala, offering cost-effective solutions, enhancing competitiveness, and increasing profitability. Take Tesla, for example. Tesla’s decision to build a factor in Nuevo Leon, Mexico, underscores the strategic advantage of nearshoring, allowing the company to produce cars more affordably than in the United States while creating up to 7,000 new jobs in Mexico. This nearshoring strategy fosters job creation in the host country, strengthening trade relations and creating cross-border trust.

A key U.S. initiative that must be furthered is Central America Forward. At a press conference on the sidelines of Arevalo’s inauguration earlier this week, USAID Administrator Samantha Power announced that the United States and Guatemala would soon conduct a high-level economic dialogue (HLED) to advance Vice President Harris’s initiative. By providing a forum for high-level officials and business leaders to engage, an HLED can help identify opportunities for increased bilateral trade and investment. With Guatemala on the cusp of an investment-grade credit rating, an HLED would allow Guatemala—with the help of the United States—to create a more conducive environment for economic activities.

The inauguration of President Arevalo was not just “a routine handover of power” but a more pivotal moment for Guatemala. The challenges Arevalo and his cabinet face are daunting, but they also present opportunities for positive change and progress in the bilateral relationship. The United States must not let the momentum fade post-inauguration. The consequences of disengagement could be far-reaching, affecting not just Guatemala but the rest of the hemisphere. As Guatemala stands at a crossroads, the United States must play a constructive role, supporting democratic values and processes and fostering economic growth through commercial engagement and nearshoring initiatives. Constructive support on behalf of the United States is not just important but imperative. 

Maria Fernanda Bozmoski is a deputy director with the Adrienne Arsht Latin America Center. Follow her on X @MariaBozmoski.

Eva Lardizabal is an assistant director with the Adrienne Arsht Latin America Center.

Image: Government of Guatemala.