Guatemala faces political uncertainty amid corruption scandal

Guatemala faces political uncertainty amid corruption scandal

Guatemala’s political stability suffers again, due to a significant corruption scandal involving President Jimmy Morales, who attempted to expel the chief of a UN-backed anti-corruption panel from the country.

In 2015, the Central American country’s former president Otto Perez Molina was forced to resign following an extensive corruption investigation. Now, the political stability of Guatemala is in question again.

Overstepping authority

On 27 August, Guatemala’s already troubled political situation worsened when President Jimmy Morales attempted to expel Ivan Velazquez, the chief of the International Commission against Impunity in Guatemala (CICIG), a UN-backed anti-corruption commission. Morales’ decision followed the panel’s announcement to strip the President of immunity in order to continue its investigation into illegal campaign financing.

The probe would target several political parties in Guatemala, including Morales’ National Convergence Front. The party, as stated by the Attorney General, received approximately $325,000 in anonymous donations, as well as having $600,000 in unreported expenses.

Morales declared that Velazquez overstepped his authority by advocating changes to Guatemala’s legislative process, violating the country’s sovereignty. Although Guatemala’s Constitutional Court provisionally overruled Morales’ order of expulsion, the President’s announcement sparked two major protests in the capital Guatemala City, and further attracted criticism from the international community, fueling further political instability in the country.

Nothing new

Corruption scandals and political crises are not new phenomena in Guatemala. In 2015, former President Otto Perez Molina resigned as a result of corruption allegations, resulting in his detention. He and former vice president Baldetti have also been investigated for bribery and money laundering, being suspected of awarding construction contracts in return for almost $38 million and other gifts.

The probe resulted in tens of thousands of protesters gathering for months in Guatemala City, giving rise to a strong anti-corruption movement among Guatemala’s citizens. Since 2007, the CICIG played a major role in cooperating with Guatemalan prosecutors in order to tackle corruption amongst high-level officials, sparking the investigation and movement which led to Perez Molina’s resignation.

Despite running his campaign revolving around the slogan “not corrupt, nor a thief” in 2015, Jimmy Morales’ reputation as an anti-corruption crusader will soon be under severe scrutiny. Besides being at the center of the recent scandal, in May a judge accused Morales’ son and brother of fraud, as they allegedly submitted $23,000 of false receipts in a tax fraud scheme in 2013.

Negative impact on Guatemala’s economy

The crisis will likely have negative repercussions on the country’s economic growth and investor confidence. Systematic corruption results in a gradual erosion of the rule of law, further challenging already fragile institutions.

Conditions for new investments and growth opportunities for businesses are not expected to be favourable for the next six months. Morales’ attempt to expel Velazquez was a major factor in the Central Bank’s decision not to raise interest rates, damping investor confidence.

This is significant when taking into consideration other factors, which combined with the recent crisis, can hurt growth and employment in Guatemala.

This year a court decision suspended work at a Tahoe Resources silver mine, resulting in a decrease in national growth by 0.4 percent. Public spending and private sector lending have slowed, partly due to the 2015 political scandal involving former President Perez Molina. In 2016, growth decreased from 4.1 to 3.1 percent.

The risks: local unrest and regional implications

In conclusion, Guatemala’s political future remains paved with uncertainty, as Morales’ future as President is still unclear. Ivan Velazquez has confirmed he will be continuing his role as CICIG commissioner, despite the President’s attempt to expel him. Meanwhile, the Supreme Court has requested to lift Morales’ immunity, although the final decision will be taken by Guatemala’s Congress.

If Congress rules in favor of the President, nationwide protests are likely, further weakening Morales’ mandate.

Guatemala’s future will also have regional implications with regards to anti-corruption efforts. CICIG enjoys strong popular support, and its focus on strengthening criminal investigations targeting high-level officials has inspired similar initiatives in Honduras and Panama.

Categories: Latin America, Politics

About Author

Benedetta Di Matteo

Benedetta obtained a LLM degree in International Laws from Maastricht University, specializing in Public International Law and International Relations. Benedetta worked as an open source analyst for Horizon Intelligence, a Brussels-based political risk firm, focusing on political and security trends in Latin America. She also completed a traineeship at the Council of Europe's Economic Crime and Cooperation Division. Benedetta focuses on international security issues, including transnational crimes.