Prospects for Democracy in the Northern Triangle

Items

• Introduction

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  The main idea we seek to examine in this report is quite simple. It is that the three countries of Central America’s ‘Northern Triangle’ – El Salvador, Guatemala, and Honduras – have flawed democracies and a uniquely challenging set of socio-economic problems: we argue that building stronger, more inclusive democratic systems will be a necessary, although potentially not a sufficient condition for beginning to solve those problems. We do not see democracy as a magic potion that causes all problems to disappear: there are too many examples in Latin America and elsewhere of democracies that have evaded, postponed, or simply failed to fix deep socio-economic problems; there are also examples in various parts of the world of non-democratic, single-party regimes that have certainly fixed at least some of the problems, some of the time (to take one example, the government of the Peoples’ Republic of China has a very impressive economic growth record over the last 30 years).

  Our central proposition therefore is that a democratic environment for the 32m people that live in the three Northern Triangle republics should encourage the kind of free and open debate in which lasting solutions to the region’s problems may be found; it will also provide accepted and legitimated mechanisms for those ideas to become policies, and for political parties to make the transition to become elected governments with the necessary authority to execute those policies.

  It is important to make an initial point that the region’s problems are deeply embedded: in various ways their very nature undermines and complicates any effort to solve them. In this report we will argue that the Northern Triangle has five big and notoriously intractable problems: crime; corruption; poverty and inequality; insufficient economic growth; and emigration. They tend to feed off each other and compromise the search for solutions. If political parties, individual politicians, and law enforcement institutions can be threatened, blackmailed, and infiltrated by criminal cartels, then they become dysfunctional, and part of the problem, rather than part of the solution. If corruption is allowed to influence the results of national elections, then there is a greater likelihood of corrupt governments that have no genuine interest in solving the electorate’s problems. If a large part of the electorate is excluded from making meaningful choices through poverty and discrimination on the grounds of gender, ethnicity, sexuality, or religious belief, then their interests will be ignored or suppressed. If threats of violence and the lack of opportunity drive people to emigrate, these countries will continue to lose some of their most valuable human capital.

• What is the baseline?

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  A starting point is to ask how democratic the Northern Triangle countries are right now. A lot of the evidence points to the existence of what could be called a major ‘democratic deficit’ in the sub-region. It is interesting to review where the three countries sit in two different attempts to build global ‘democracy rankings’, by the UK-based Economist Intelligence Unit (EIU) and by the US-based Freedom House.

  The 2017 Democracy Index was published by the Economist Intelligence Unit (EIU) and covered 167 countries. The ranking tracks 60 indicators designed to measure pluralism, civil liberties, and political culture. The EIU uses these to compile country scores on a scale of zero to 10. Then, based on these results, it classifies countries into four main groups: full democracies (scores of 8-10), flawed democracies (6-8), hybrid regimes (4-6), and authoritarian regimes (a score of 0-4). The average score in Latin America fell for the second year running in 2017, to 6.26, down from 6.33. On average then, Latin America is a region composed largely of flawed democracies. Although it is considered the most democratic region in the developing world, the average score suffered as a result of continuing issues with corruption, which helped erode popular confidence in democracy and in democratically elected leaders.

  The best-performing Northern Triangle country in the index, El Salvador, gets a score of 6.43, which ranks it as 65^th out of 167 counties and also puts it in the category of ‘flawed democracy’. The EIU defines flawed democracies as nations where elections are free and fair and basic freedoms are honoured, but where there are shortcomings of different types, such as restrictions on media freedoms, an under-developed political culture, low levels of political participation, or problems with the quality of governance.

  In the same 2017 edition of the index Guatemala scores 5.86 and is ranked 80^th in the world; Honduras scores 5.72 and is ranked 82^nd. This means that these two countries fall into the lower category of ‘hybrid regimes’. The EIU describes this category as consisting of nations where consequential irregularities exist in elections “regularly preventing them from being free and fair”. Governments tend to apply pressure on political opponents; the judiciary is not independent; there is widespread corruption and harassment; pressure is placed on the media; and the rule of law is weak. There are also low levels of participation in politics, and poorly functioning governance.

  

  Commenting on the performance of Latin American countries in the 2017 index the EIU highlighted the deterioration in the scores of both Guatemala and Honduras. The fall in Guatemala was largely attributed to attempts by President Jimmy Morales to expel Iván Velásquez, the head of the UN-backed International Commission Against Impunity in Guatemala (known by its Spanish acronym, Cicig) as it investigated allegations that a drug-trafficking cartel had illegally funded his presidential campaign. The fall in Honduras reflected serious allegations of fraud in the November 2017 presidential election. UK-based The Economist had earlier reported that incumbent President Juan Orlando Hernández had used a variety of vote-rigging techniques. An initial lead in the vote count for his rival, opposition candidate Salvador Nasralla, was reversed in later returns, increasing suspicions of a fraud.

  It is worth noting that the EIU arranges the 60 indicators it tracks into five ‘columns’ representing first, electoral processes and pluralism; second, the functioning of government; third, political participation; fourth, political culture; and fifth, civil liberties. On average and relatively speaking, the Northern Triangle countries score best for electoral processes and pluralism, and for civil liberties. In contrast low political participation, a weak political culture, and poor functioning of government drag down their overall score. There are of course variations between countries: after the reports of electoral fraud in Honduras, for example, that country’s score for electoral processes and pluralism was brought down: it now stands below that of El Salvador but still slightly higher than in Guatemala.

  It is sometimes difficult to compare various different country ranking and indices simply because each of them covers a different number of countries. One way to simplify this is to look at whether countries fall into the top, second, third, or bottom quartile of any broadly representative global list, independent of how long it is. In this case all three Northern Triangle countries fall into the second quartile of the 167 countries covered in the democracy index: El Salvador does so comfortably, while Guatemala and Honduras just scrape in.

  The US-based Freedom House also publishes a regular index and country ranking called ‘Freedom in the World’, which covers 195 countries and 14 territories. It applies a methodology based on questions derived from the Universal Declaration of Human Rights. Each country is assigned between 0 and 4 points on 25 indicators, with a potential maximum aggregate score of 100. The scores are then used to produce two indicators, one for political rights and one for civil liberties – both are rated from 1 (most free) to seven (least free). These scores are then used to group countries into three different categories: Free, Partly Free, and Not Free.

  The latest Freedom in the World report, covering data compiled in 2017, is sombre about the global situation. It states that both political rights and civil liberties have reached their lowest point in a decade, extending “a period characterised by emboldened autocrats, beleaguered democracies, and the United States’ withdrawal from its leadership role in the global struggle for human freedom”. It highlights that the world’s most powerful democracies are facing seemingly intractable problems including socio-economic disparities, partisan fragmentation, terrorist attacks, and an influx of refugees. The importance of this comment is that it means the external environment facing the Northern Triangle countries has become less ‘democracy friendly’. This relates particularly to what is described as the “striking” withdrawal of the United States from its “historical commitment to promoting and supporting democracy”.

  In terms of Latin America in 2017 the report highlights continuing deterioration in Venezuela, and improvements in Ecuador, Argentina, and Colombia. Like the EIU it highlights a decline in Honduras, linked to the allegations of electoral fraud in November 2017. Freedom House places less emphasis on country rankings, and more on the Free/Partly Free/Not Free status. However, using its aggregate scores, El Salvador comes 88^th out of 210 countries and territories with a score of 70 out of 100, followed by Guatemala ranked 115^th (aggregate score of 56) and by Honduras ranked 131^st (score of 46.0). This means that El Salvador falls into the second quartile, while Guatemala and Honduras are in the third quartile of this list. It is interesting to note that both the EIU and Freedom House rank the three Northern Territory republics in the same order: El Salvador as the most democratic or free, followed by Guatemala, with Honduras as the least democratic/free of the group. In fact, El Salvador comes under Freedom House’s ‘Free’ category while Guatemala and Honduras are classified only as ‘Partly Free’.

  Freedom House also provides a more detailed country-by-country narrative. In El Salvador is says that violence linked to criminal gangs remains a serious problem. It notes that the government has pursued a harsh, militarised response to the country’s gangs. Elections are “generally credible and free”. The media and civil society are lively, but journalists risk harassment and violence when covering crime or corruption. Major developments in 2017 included a decline in the homicide rate, the acquittal of police officers accused of murdering eight people on a farm (taken by some as a potential sign of impunity), and the conviction in absentia of former President Mauricio Funes (2009-2014) on charges of illicit enrichment.

  Elections in Guatemala are described as “generally free”, but here too organised crime and corruption are seen as severely impacting the functioning of government. Violence and criminal extortion are particularly harmful. The report says “Journalists, activists, and public officials who confront crime, corruption, and other sensitive issues risk attack.” Key developments in 2017 included the president’s unsuccessful attempt to deport the head of Cicig: on the other hand, attempts to lift the president’s immunity from prosecution were blocked in Congress. On the plus side, the homicide rate declined for the eighth year in a row.

  In Honduras political stability is seen as being undermined by institutional weakness, corruption, violence, and impunity. Freedom House says “While Honduras holds regular elections, irregularities surrounding the 2017 presidential poll prompted election monitors to call the result into question.” Also in that year a special commission continued trying to purge and reform the national police, after reports of high-level corruption and collusion with drug traffickers. As in the rest of the Northern Triangle, here too homicide rates have been declining.

• Deeply disenchanted voters

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  That the three Northern Triangle republics have formally democratic systems, despite their flaws and shortcomings, has to be seen as a positive. Yet one sign of the malaise they are suffering is that their voters are showing disenchantment with what this formally democratic system is actually delivering, and indeed, with the benefits of democracy itself.

  In this they share the views of voters across the wider Latin American region. The broad picture presented by the 2017 Latinobarómetro public opinion survey is that there are deep concerns over the strength and performance of Latin American government institutions. The survey showed that across 18 countries in the region support for democracy has dipped to 53% of respondents, down from 61% in 2010. On average, only a third are happy with how democracy is working, three quarters think decisions are taken mainly for the benefit of the rich and powerful, and 62% think there has been no progress in the battle against corruption. Marta Lagos, Latinobarómetro director, said “There is no indicator telling us that democracy is improving. It is doing badly in many countries in the region”.

  A similar message was contained in a USAID report, ‘The Political Culture of Democracy in the Americas 2016/17’ which also used Latinobarómetro survey data. It draws four sobering conclusions for the region as a whole, which may be particularly relevant for the Northern Triangle. First, support for democracy was lower in 2016/17 than in previous years; in fact within each country support appeared to be lowest among the younger, the less educated, and the less wealthy. Second, a significant portion of the population (around 40%) would support a coup d’état by the executive power, including the shutdown of the legislature, if that offered a way of reducing crime or corruption. Third, trust in political parties has slumped to the lowest level since the Latinobarómetro surveys started over 20 years ago. And fourth, partisan affiliation – party membership – fell by a substantial 10 percentage points in 2016/17 – an indication perhaps that political volatility might be on the increase.

  Going into the detail for the Northern Triangle countries reveals what can best be described as a degree of exasperation among voters. When asked whether democracy is the most preferable form of government, support has fallen from highs of 50%-80% in the late 1990s down to a narrow band of only 34%-36% in 2017. On the slightly different question of whether voters are satisfied with democracy, the average positive response in Latin America in 2017 was 30%; in the Northern Triangle it was lower: 29% in Honduras were satisfied; in Guatemala 26% were satisfied; and in El Salvador only 15% pronounced themselves as satisfied.

  Mixed feelings about democracy
  % support for democracy as the best system of government

  

  % agreeing with the statement "Democracy is preferable over any other form of goverenment".

  Source: Latinobarómetro Database

  On average, Latin American governments had 36% approval rates in 2017. The Honduran government scored better with 47% approval, followed by Guatemala with 38% and El Salvador much further down with only a 17% approval rate. The survey also picked up low levels of confidence in key institutions such as political parties, the legislature, and the courts. Confidence in the elected legislatures was extremely low (19% in El Salvador, 17% in Guatemala, and 14% in Honduras). In contrast confidence in the Catholic Church was high (78% in Honduras, 76% in Guatemala, and 62% in El Salvador).

  An earlier survey, conducted by CID-Gallup for the US-based Atlantic Council in August-September 2016 in the three Northern Triangle countries, produced similar results. That survey found that nearly nine out of ten respondents believed there was “a lot” of corruption in their country. Over 75% of the people in all three countries had “little to no” confidence in the police. In El Salvador over seven out of every ten respondents did not have confidence in judges, the military, the tax authority, or the attorney general. Similar results were obtained in Guatemala and Honduras. The two top concerns for respondents across the three countries were first, crime and violence, and second, the cost of basic goods.

• Problem Number 1: Crime and Violence

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  Despite some improvements in recent years, the Northern Triangle countries continue to experience some of the highest murder rates anywhere in the world outside war zones. The United Nations says that a homicide rate in excess of 10 per 100,000 inhabitants constitutes an epidemic. For at least the last 15 years all three Northern Triangle countries have experienced homicide rates that are various multiples of that – in El Salvador in 2015 the rate was 108 per 100,000, a spike related to the end of a truce in its recurring gang wars. Despite an improvement last year El Salvador was still the second-most murderous country in the region with 60 homicides per 100,000, after Venezuela (89 per 100,000). Honduras was in fourth place (42.8 per 100,000) with Guatemala in sixth (26.1 per 100,000). For comparison, Chile had a homicide rate of only 3.3 per 100,000.

  The murderous Northern Triangle
  Homicide rates per 100,000 inhabitants

  

  Source: UNODC, InSight Crime

  There are multiple reasons for such extreme violence. Two of the three countries in the triangle, El Salvador and Guatemala, suffered protracted civil wars which embedded a culture of violence in their social fabric. In El Salvador the war lasted over 12 years (1979-1992) and pitted right-wing military-led or influenced governments against the leftist Farabundo Martí National Liberation Front (FMLN). The United Nations has estimated over 75,000 people died in the conflict. In Guatemala the armed conflict lasted from 1960 to 1996, and again saw military-led and influenced governments fight left-wing rebels. A particular feature of the Guatemalan conflict was acts of genocide perpetrated against Maya indigenous people and Ladinos (mestizos) by the army. Estimates of the casualties range up to around 200,000. While both civil wars came to an end through peace agreements which incorporated the rebel forces into the democratic political process – a highly positive development – the reality is that subsequent governments have failed to effectively combat poverty and social exclusion. The current flawed democracies remain far from inclusive.

  The case of El Salvador’s gangs is particularly striking. It is generally accepted that the gangs were forged in a complex cycle of displacement and migration. Many Salvadorian refugees from the civil war in the 1980s migrated, legally and illegally, to the United States. In some US cities, particularly Los Angeles, their children grew up and joined street gangs. Many of the gang leaders then returned to El Salvador (some were deported back home) from where they further developed the gangs and built them up into international criminal organisations involved in drug and people trafficking and extortion. These gangs, particularly Mara Salvatrucha (MS-13) and Barrio 18, are now the main criminal organisations in the Northern Triangle, with a strong presence not only in El Salvador but also in Guatemala and Honduras.

  On the whole, governments have responded to crime with hard-line or mano dura policies. Critics say that while these policies may deliver some short-term improvement they are often counter-productive. Allowing extreme overcrowding and harsh conditions in the prison system has meant that the gangs effectively run the jails where they can forcibly recruit more members. Mass detentions and incarceration, along with militarised policing, have become standard procedure, causing concern among human rights activists. In El Salvador killings spiralled out of control after the collapse of an inter-gang truce in 2014. Both right- and left-wing parties have competed to follow hard-line law-and-order policies, which have tended to be popular with the electorate, despite the misgivings of those who propose a more nuanced ‘citizen security’ approach, including reform of the criminal justice system.

  Other factors also help fuel violence. Most of the murderers and their victims are young men. This demographic has few alternatives to the gang life, because of high unemployment, high labour informality, and scarce educational opportunities. Low economic growth and high inequality contribute. The Northern Triangle also suffers a degree of geographic misfortune: because of its location, it is a major staging post for the trafficking of illicit drugs produced in South America up through Mexico into the United States.

• Problem Number 2: Corruption

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  Corruption has been a perennial problem across Latin America, and acutely so in the Northern Triangle countries. Lobby group Transparency International (TI) publishes an annual Corruption Perceptions Index (CPI) which covers 180 countries and measures corruption on a 0-100 scale, where 0 is highly corrupt and 100 is very clean. The 2017 index (published in February 2018) found that more than two-thirds of the countries covered scored below 50 and that the global average was 43. El Salvador had a score of 33, meaning it is seen as significantly more corrupt than the global average. It was ranked 112^th out of 180 countries. Honduras scored 29, ranking it 135^th in the world, and Guatemala had the poorest performance, with a score of 28, ranking it as 143^rd in the world. This meant that all three countries fell into the third quartile of the ranking, although Guatemala was very close to dropping into the fourth or bottom quartile.

  In its commentary on the results TI pointed out that there have been “great strides” in the battle against corruption in Latin America, with major investigations in countries like Brazil and growing anti-corruption movements in a number of countries. Yet despite this “the region continues to score poorly”. Progress in the Northern Triangle has clearly been limited. The report highlighted the situation in Guatemala where the attorney general’s office and Cicig were investigating politicians and businessmen for cases of corruption, including illegal campaign funding by President Jimmy Morales. Yet it acknowledged there was a danger of a standstill, arguing “it is vital to promote an integral approach that tackles key structural issues, including political funding, public procurement, and the strengthening of independent, strong, and flexible legal institutions”.

  Corruption intensifies a range of connected problems in the three countries we are examining. It leads to economic inefficiency and a misallocation of resources. Worldwide, corruption is estimated to cost around 2% of GDP, but the indications are that losses in the Northern Triangle exceed that proportion by a significant margin. TI distinguishes between ‘grand corruption’ – major cases of fraud and theft – and the smaller scale everyday corruption, usually associated with business that must necessarily be transacted with officials. For the poor, paying bribes takes up a greater proportion of their income, meaning that corruption works as a major regressive tax. A survey carried out in 2017 in 20 Latin American countries by TI found that 62% of respondents felt that corruption had increased. On average, just under one in three respondents (29%) who had used key public services – schools, hospitals, acquiring ID documents, utilities, police and courts – had paid bribes. In Honduras 33% had paid bribes; the proportion was 31% in El Salvador and 28% in Guatemala. The survey found that in Honduras people reported the highest level of bribery when dealing with the courts: 56% of people who had used the judicial system said they had paid a bribe in the preceding year.

  

  Source: Transparency International

  Grand corruption is one of the top political issues in the Northern Triangle because it appears that a succession of governments have been ‘captured’ by corrupt interests. Notoriously, Guatemala’s president Otto Pérez Molina and Vice President Roxana Baldetti were found to be the leaders and beneficiaries of the La Línea customs corruption scandal: following investigations by the attorney general’s office and Cicig they were removed from office and imprisoned in late 2015. The scandal over corruption led to the election of Jimmy Morales the following year, on the slogan that he was “neither corrupt nor a thief” (ni corrupto ni ladrón). However, despite that claim, he and members of his family have been under investigation for a range of alleged improprieties, including using illegal funding for the election campaign, tax evasion, and receipt of inappropriate publicly funded bonus payments.

  Confidence in the judiciary has been so low that both Guatemala and Honduras have – despite opposition from a range of lobby groups – accepted outside legal help. Guatemala has used the UN-backed Cicig, while Honduras has set up the Organisation of American States (OAS)-supported Mission to Support the Fight against Corruption and Impunity in Honduras (known by its Spanish acronym MACCIH). The work of both institutions has been widely resisted by parts of the political and business establishment.

  There is evidence to show grand corruption is indeed a major structural problem. Political parties need large amounts of cash to fight election campaigns: they sidestep funding rules to take money illegally from business interests or drug-trafficking cartels. This means that if successfully elected, new governments are compromised and forced to do their secret supporters’ bidding. One of the clearest examples of this process came in December 2016 when Brazilian civil engineering group Odebrecht admitted paying US$788m-worth of bribes in Brazil and 11 other countries, including Guatemala. Documents revealed that Odebrecht helped fund seven presidential election campaigns in Latin America and Angola; it advised candidates on what type of public works could be included in their electoral promises and then in return expected to be awarded the large associated construction contracts. In Guatemala Odebrecht admitted paying US$18m in bribes during the Pérez Molina presidency, to secure various contracts, including a US$399m highways project.

• Problem Number 3: Poverty and inequality

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  The headline story for Latin America over the last 15 years is that, against the background of the global commodities boom (the decade running up to 2012-2013), there was significant growth and redistribution of income in some of the major economies, enhancing the size of the middle class, reducing poverty, and reducing inequalities (although Latin America still remains the region of the world with the most unequal distribution of income). For the region as a whole the end of the commodities boom has raised concern that significant socio-economic gains made in the noughties may begin to slip back. Indeed, there are some signs that poverty rates began to rise once more from around 2015-2016.

  The story in the Northern Triangle is that the move to reduce poverty and inequality has been less pronounced than elsewhere in the region. Although there have been advances, in general these three countries experience both greater poverty and greater inequality than many of their peers. Using the World Bank’s definition of poverty as the proportion of the population living on less than US$4 per day (expressed at 2015 prices and on the basis of PPP or purchasing power parity), 60.3% of Guatemalans, 58.2% of Hondurans, and 28.4% of Salvadorians are poor. This contrasts with a much better situation in neighbouring Central American countries. A lower total of 27.5% of Mexicans, 16.9% of Panamanians and 11.4% of Costa Ricans are poor, using the same basis of measurement.

  Along with the rest of Latin America the Northern Triangle countries have made some moves towards greater equality of income, but progress has been agonisingly slow. The World Bank compiles data series for the Gini coefficient, a measure of equality in the distribution of income. It presents the coefficient on a scale of zero (perfect equality) to 100 (maximum inequality). Reducing the score is therefore a sign of a move towards greater equality. The chart below shows the trend in the three countries and in Peru (chosen as proxy for the regional trend). El Salvador has managed to get its Gini score down furthest, to 40.0 in 2016, a 12.5% reduction in ten years. Peru had brought its coefficient down to 43.8 (less equal than El Salvador) but it achieved a faster rate of reduction, of 13.3%. Despite also reducing the rate quite strongly, both Honduras and Guatemala remained more unequal in the distribution of income, with Gini scores of 49.6 and 48.3 respectively.

  Becoming more equal - but very slowly
  Gini coefficient for Honduras, Guatemala, El Salvador, and Peru

  

  Gini coefficient presented on a scale of 0-100, where 0 is "perfect equality" and 100 is "maximum inequality".

  Source: World Bank

  One further way to understand how unequal the Northern Triangle countries remain is to look at income shares by quintiles of the population. According to data compiled by the UN’s Economic Commission for Latin America and the Caribbean (Eclac) in the region as a whole the richest 20% of the population takes 45% of the available income. However in Guatemala they take more: 51% of the income. In Honduras they also take more, 47%; in El Salvador on the other hand they take a little less than the regional average, 41%. The opposite side of that coin is that the poorest 20% of the Latin American population takes 6% of the available income; in Guatemala and Honduras they take even less, 5%, while in El Salvador they take a tiny bit more, 7%.

  

• Problem Number 4: Insufficient economic growth

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  The underlying rate of economic growth is an important element in the wider equation covering poverty and inequality. In both political and economic terms it is easier to redistribute and help the poor at a time when the general rate of growth is strong. There is often greater social harmony when everyone’s income is on the rise. In this respect, however, there is a paradox in the performance of the Northern Triangle countries over the last four decades.

  At first glance these economies have performed relatively well in the headline growth stakes, and certainly on a par with the rest of Latin America and the Caribbean. The chart below shows five-year average annual GDP growth rates for the region as a whole and for each of the three Northern Triangle economies. Two or three things stand out. One is that the impact of the civil wars in El Salvador and Guatemala was massively negative for those two economies in the 1980s. In the early 1980s El Salvador’s five-year growth average was a negative 5%-6%. In the mid-1980s Guatemala’s average growth rate dropped to -1.2%. In contrast, throughout that period, Honduras retained positive if relatively low growth. Going forward into the 1990s and the noughties, all three economies seem to have managed to keep fairly strong growth, broadly in a 2%-4% range and occasionally higher. In 2007 and 2008 the five-year average growth rate in Honduras was almost 6%. An important conclusion is that on average in the last ten years all three economies have been oscillating around 3% annual growth. In general terms this is a good performance: in the last couple of years it has been higher than the average for the region as a whole. The Northern Triangle countries can therefore make a credible claim to have achieved macro-economic stability, a combination of reasonable growth and low inflation.

  Northern Triangle economies: Stuck on 3%?
  5-year GDP growth averages %

  

  Source: World Bank

  But the moment we begin to look at what this does for the poor and the excluded, it quickly becomes evident that 3% annual growth is simply not enough. Macro-economic stability has co-existed with unacceptably high rates of poverty and social and political exclusion. Because these countries still have significant underlying population growth rates, per-capita incomes are expanding much more slowly. The World Bank compiles per-capita gross national income (GNI) data for Guatemala and Honduras (no comparable data is available for El Salvador). In the five years to 2017 growth in GNI per-capita averaged a much lower 1.8% in Honduras and 1.6% in Guatemala. And we know that even this much lower per-capita growth is unequally distributed. A related point is that a relatively small divergence in annual GNI per-capita growth rates over time has a much larger cumulative effect. To illustrate this we have built a weighted GNI per-capita index for two groups of countries: Guatemala and Honduras on the one hand, and Uruguay and Panama on the other (the latter two chosen as examples of the better performers with the region). Between 1985 and 2015, a period of 30 years, the Uruguay/Panama GNI index rose to 227.7, while the Guatemala/Honduras GNI index only rose to 141.5. In other words, after 30 years of relatively small differences in annual growth, the better performing countries ended up with per-capita incomes that were 1.6 times greater than in Guatemala and Honduras.

  Not growing fast enough
  Index of GNI per capita, 1985=100

  

  Source: World Bank, LatinNews calculations

  Another factor preventing more equal distribution of the benefits of growth is the persistence of extremely high levels of informal employment. Informal workers are those who make no tax or social security payments and who at the same time receive no formal state benefits (such as the right to a pension). They also work in an unregulated manner – meaning they are not adequately protected in terms of enforcing maximum working hours, safety, non-discrimination, and other rights and duties. According to the International Labour Organisation (ILO) informality, as a proportion of total non-agricultural employment in 2016, was 73.8% in Honduras, 73.5% in Guatemala, and 63.1% in El Salvador. These are some of the highest rates in Latin America. High informality creates a vicious circle. It erodes government tax revenue and simultaneously reduces the power of the state to ensure minimum levels of welfare for a large part of the working population.

• Problem Number 5: Emigration

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  Emigration is both a symptom of the Northern Triangle’s deeply embedded socio-economic problems, and a causal factor. The combination of a lack of economic opportunity together with threats of criminal violence has forced nearly 10% of the roughly 30m-plus inhabitants of the three republics to emigrate in recent years, with the vast majority of them making their way up to the United States. The departure of such a large proportion of the population has to be seen as fundamentally negative for the long-term future of all three economies. Yet at the same time it has become to some extent self-sustaining. With or without legal status, significant expatriate communities in the US send money home to friends and family. These flows of remittances have become of critical importance to the three economies. In 2017 remittances received in El Salvador were US$5.1bn or the equivalent of 20.4% of GDP; in Guatemala they were US$8.45bn or 11.2% of GDP; and in Honduras they were US$4.32bn or 18.8% of GDP. The Northern Triangle economies have become highly dependent on these financial flows. Even the criminal organisations that in the first place force people to flee in fear of their lives have found a way to profit from emigration. The street gangs, or maras, are deeply involved in extortion, people smuggling and trafficking. They frequently charge a ‘tax’ to allow emigrants to pass through key points in the land journey across Mexico and into the US.

  Emigration is a contentious issue in relations with the United States, the Northern Triangle’s main partner in terms of trade, investment and security. The immigrant or foreign-born share of the US population is currently 43m people, or 14% of the total. Of those, around 11m are believed to be undocumented. According to the 2010 US census, Central Americans living in the US totalled just under 4m. Data collected in 2015 showed 2.171m US residents were of Salvadorian origin, 1.377m were of Guatemalan origin, and 851,000, were of Honduran origin, adding up to a total of around 4.4m. Immigrants play a key role in parts of the US economy. Surveys have shown they make up 45% of domestic employees, 36% of workers in manufacturing, 33% of the agricultural labour force, and 32% of those in the hotels and accommodation sector.

  There has been a fundamental change in the nature of Latin American migration to the United States. For many decades Mexican emigrants, who were primarily driven by economic factors, were the largest group among those coming. According to Jeffrey Passel, a demographer at Pew Research, up to 2010 migration numbers ebbed and flowed in synch with the US economy and unemployment rate. “When the US unemployment went down, migration went up. If the unemployment rate went up, migration went down,” he said. But after 2010, as Central Americans became more dominant (particularly those coming from the Northern Triangle) that relationship stopped. The Central Americans kept coming regardless of what happened to the US economy. For them, ‘push factors’ – the desire to escape poverty, violence and crime – appear to be more important than ‘pull factors’ – the employment opportunities north of the US border. In short, the Central Americans are much more like political refugees.

  Giovanni Peri, an economist at the University of California, says people from the Northern Triangle are “younger, more vulnerable, and more similar to refugees” and hence more disposed to run the risk of getting caught and turned back. Children – those under the age of 18, accounted for 7% of all people stopped at the border in 2011, rising to 27% in 2017. Peri adds, “The very strict enforcement keeps away people who are mainly motivated by jobs, and selects only very desperate Central Americans, including many kids.” Research by another economist, Michael Clemens at the Centre for Global Development, suggests that Northern Triangle migration is driven by spikes in the murder rate in particular cities in those three countries.

  Successive US governments have had a range of policy options open to them in response to the inflow of Central American migrants. Broadly speaking they have ranged from trying reduce ‘push’ factors at source (aid programmes designed to support economic development, poverty reduction, and new job creation within the Northern Triangle) through to enforcement measures such as building walls, tightening border security, and repressing crime and drug trafficking. While elements of both have co-existed, the arrival of Donald Trump as the new US President (January 2017) signalled a shift to tougher enforcement and tighter borders. The Trump administration inherited a programme known as at Alliance for Prosperity, whereby the US committed US$2.6bn in foreign assistance to the Northern Triangle from 2015-2018, with the three republics committing US$5.4bn of their own funds from 2016-2017 to a joint programme to tackle “the security, governance, and economic drivers of illegal immigration and illicit trafficking while increasing opportunities for US and other businesses”.

  Writing for Lawfare, a website focused on US national security issues, Jacob Hofstetter has argued that both the Trump administration and the Obama administration before it provided aid to Northern Triangle countries with the aim of improving governance, citizen security, and economic prosperity – things which in the long term may help stem the flow of migrants. However, under Trump “the justification for these aid programmes has shifted from the rhetoric of nation building to that of strict migration enforcement”. Trump has even suggested aid levels (already somewhat reduced) could be cut back further if the desired fall in migrant numbers does not materialise in the short term. In May 2018 he said his administration might “work out something where every time someone comes from a certain country, we’re going to deduct a rather large amount of money from what we give them in aid”. Hofstetter suggests an excessive focus on short-term border control could be self-defeating. By cutting aid “the United States would face long-term irregular migration from the Northern Triangle, no matter how many ‘zero tolerance’ tactics the Trump administration deploys”.

• Looking forward: The coming challenge for the Northern Triangle

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  It is clear that as a group, the three Northern Triangle countries face an extremely difficult situation over the next few years. There has been little progress to resolve the five main problems we have listed, which remain deep-rooted and tightly intertwined.

  We have taken the position that building stronger and more inclusive democracies is a necessary condition to begin to come up with solutions. In theory therefore the pathway is clear: citizens should be looking to the next scheduled elections in each of the three countries as an opportunity to freely debate the problems, and support and vote for the parties and candidates with the best policies to tackle them. However, to put it bluntly, elections don’t always solve problems. In current times the electorate is disenchanted with democracy, and deeply distrusts most institutions. There is also a global political climate which has seen the return of populism, and a rejection of globalism in favour of narrow nationalism. There are also serious doubts over the integrity of elections with the rise of ‘fake news’, the manipulation of social media, and the rejection of expert opinion in favour of simplified sound bites.

  In an optimistic scenario, over the next four to five years new, democratically elected administrations will come to office able to articulate and execute policies that will begin to roll back some of the Northern Triangle’s main problems. It would be unrealistic to expect all problems to be turned around. A more realistic positive expectation would be to achieve progress in one or two areas, which might have a positive ‘demonstration effect’ across the sub-region. How likely is this? We will next turn our attention to the outlook for the next national elections in each of the three republics.

  Honduras: electoral disappointment

  The November 2017 elections in Honduras, rather than an example of democratic choice, proved to be a case study in polarisation and dysfunctional outcomes. A central theme in Honduras has been the ongoing desire of leading politicians to remove term limits and perpetuate themselves in power. Conservative forces supported an army-led coup d’etat in 2009, alleging that the elected left wing incumbent, José Manuel ‘Mel’ Zelaya (2006-2009), had been planning to change the constitution so as to be able to run for consecutive re-election. Juan Orlando Hernández of the right-wing Partido Nacional, who had supported the coup, was subsequently the victor in the general elections of July 2013, campaigning among other things on promises of a militarised response to the spread of criminal gangs. Despite his previous support for term limits, once in office Hernández sought to enable his own re-election. Although consecutive re-election is explicitly banned (Article 239 of the Constitution) Hernández secured a controversial 2015 decision from the Supreme Court, packed with government supporters, which voided that article.

  The elections were essentially a three-way contest, between Hernández, for the Partido Nacional, Salvador Nasralla for the Alianza de Oposición Contra la Dictadura (a centre-left coalition that included former President Mel Zelaya’s Partido Libertad y Refundación – LIBRE), and Luis Orlando Zelaya of the Partido Liberal (PL). Initial results showed Nasralla well ahead but after a suspicious interruption of the vote count, Hernández was proclaimed the victor. The Supreme Electoral Tribunal (dominated by government appointees) eventually claimed Hernández had received 42.95% of the vote to Nasralla’s 41.42%. The Organization of American States said the poll “was characterised by irregularities and deficiencies, with very low technical quality and lacking integrity” – it called for new polls to be held. The government refused to call new elections while the opposition refused to accept the results. Security forces violently repressed a wave of anti-government demonstrations in which over 30 people were killed. The UN intervened in an attempt to promote a dialogue to resolve the political impasse. This in turn was hampered during the course of 2018 when the opposition coalition split apart. While Mel Zelaya and LIBRE argued for a hard-line policy of anti-government insurrection, Nasralla agreed to take part in the ‘dialogue’. The government meanwhile dragged its feet: it took almost a year for the political dialogue to commence.

  The outlook for Honduras over the next three to four years, running up to the general elections due in November 2021, is therefore problematic. The current government lacks democratic legitimacy; deep divisions in the opposition mean that the political dialogue is unlikely to succeed. Meanwhile the country’s self-perpetuating problems continue. Investigations carried out by the OAS-backed Honduran Mission of Support Against Corruption and Impunity (MACCIH) have uncovered the so-called ‘Pandora case’ in which 38 public figures are accused of diverting over US$11m of government money into the campaign funds of the ruling Partido Nacional (PN) and other parties. The judiciary’s ability to prosecute is limited: the head of the attorney general’s office (Ministerio Público – MP) has just been re-appointed for another five years, after a flawed attempt to elect a successor collapsed in Congress. Anti-corruption campaigners say that the Supreme Court has been dragging its feet on the Pandora case, failing to convene initial hearings. In other respects the country continues to struggle: opposition and human rights activists continue to be persecuted; although the homicide rate has fallen, Honduras is still one of the most violent countries in the world; economic growth remains skewed against the poor.

  An optimist would argue that last year’s flawed elections will have heightened awareness of the need for authentic democracy; that despite its difficulties MACCIH and some Honduran prosecutors are working to enforce the rule of law; and that the work of civil society organisations, together with some international pressure, is also having a positive impact. It is possible that popular mobilisations will force the government to allow more genuine democracy: but this will be difficult as long as the opposition is divided.

  Guatemala: one step forward, two back?

  On first examination it would appear that Guatemala has progressed much further towards democracy and the rule of law than Honduras. The investigation of the La Línea corruption scandal, led by an effective partnership between the UN-backed International Commission Against Impunity in Guatemala (Cicig), the Ministerio Público (MP – attorney general’s office), and popular protests and mobilisations, achieved unprecedented results: the removal and imprisonment of both President Otto Pérez Molina and Vice President Roxana Baldetti who were subsequently put on trial facing multiple corruption charges. It is hard to imagine a more dramatic and decisive blow against impunity or a more public affirmation that all citizens, no matter how powerful, are subject to the rule of law.

  Yet, despite this encouraging achievement in many ways the country has subsequently slipped back. In October 2015 Jimmy Morales was elected as the next president, after campaigning on the slogan that he was ni corrupto ni ladrón (neither corrupt nor a thief). Yet once in office Morales has been troubled by multiple allegations of impropriety, including illicit campaign financing, tax evasion by members of his family, receipt of improper salary bonuses, and various other issues. The president has reacted by attacking Cicig and seeking to weaken its anti-corruption work. In August 2017 he unsuccessfully tried to deport the head of the Cicig, Iván Velásquez, a Colombian citizen (a Guatemalan court voided the deportation order). Also unsuccessfully, he has tried to get the UN leadership to replace Velásquez. On other fronts – for example campaign promises to reduce poverty and child under-nourishment – there has been little progress. And despite the ‘demonstration effect’ of the La Línea case, there is considerable evidence that corruption remains deeply embedded in the country’s politics and business practices.

  The comparison between Honduras and Guatemala raises a question (which, as we will see shortly, is also relevant in El Salvador) concerning the role of political parties. Honduras has traditionally had a two-party system (liberals and conservatives, the latter now represented by the Partido Nacional) that has now begun to fragment. In some ways the fragmentation process has had negative effects, such as the current weakness and division of the opposition. In Guatemala political parties are much more fragmented, and this too can be seen as a negative. In the 2015 congressional elections 17 parties took part and 12 of them secured at least one seat. The president’s party, Frente de Convergencia Nacional (known as FCN-Nación), is small and lacks a congressional majority. To govern, the president must therefore put together a coalition in Congress. Critics say a proliferation of small, opportunist parties with little political conviction or principle can create a situation where corruption and nepotism is used as the ‘glue’ to hold alliances together. From this perspective, Guatemala is in danger of replicating the ‘presidential coalitionism’ seen in Brazil, which has also been cited as a contributing factor to that country’s corruption problem.

  Entrenched two-party systems on the other hand can also be negative if they exclude new or independent forces. From this perspective, multi-party systems have their benefits. This may be relevant in Guatemala where the next elections are due in June 2019. It is widely expected that Thelma Aldana, the former attorney general (she was in office in 2014-2018), may run for the presidency, and that she would be a strong contender because of her anti-corruption credentials. A range of civil society organisations and new political parties (including Encuentro por Guatemala, Semilla, and Libre) have discussed forming a coalition with her as a candidate. Should this potential coalition develop, it will be important to look at the contrast between the policies it adopts, and those of its main rivals. Unlike Honduras, Guatemala has a good record for holding fair and free elections in recent years. There is therefore the possibility that as a result of next year’s elections a new administration with a fresh approach to the country’s problems may take office in January 2020.

  El Salvador: breaking the old mould?

  Since the end of the civil war in the1990s El Salvador has effectively had a two-party system, formed by the right wing Alianza Republicana Nacionalista (Arena) and the leftist Frente Farabundo Martí de Liberación Nacional (FMLN). The two have been characterised by strong ideological right-left polarisation and a tendency to block and obstruct each others’ policies (particularly when the party in government lacks a majority in the legislature). But they have also resembled each other in some respects. Presidents of both parties have been linked to corruption and the misuse of public funds. Both parties have supported a hard-line crackdown on street gangs, but with mixed results.

  The current FMLN government of President Salvador Sánchez Ceren reaches the end of its term in June 2019 and is suffering from low popularity ratings. Presidential elections are due in February 2019 and the conventional wisdom has been that Carlos Calleja, a businessman-representing Arena, is likely to win as the party, together with other smaller allies, took nearly 58% of the congressional vote in March 2018. However, there is also likely to be a major challenge to the two-party system mounted by Nayib Bukele. Bukele is a dissident former FMLN member who has broken away and will stand for the centre-right Gran Alianza por la Unidad Nacional (Gana) party. Bukele built his political reputation as a pragmatic, non-ideological mayor of San Salvador, the capital. His popularity was built on a series local initiatives including provision of street lighting and urban regeneration projects. He therefore represents a new, less-ideological approach.

  The optimistic argument in El Salvador is that the political system will change, as key leaders become aware that voters are disenchanted with the old rigid and ideological two-party system. Bukele’s challenge may drive changes in attitude as the candidates seek to try to assess and respond to the popular mood. Hugo Martínez, presidential candidate for the FMLN, has already said that if his party wins he will appoint a cabinet “90% composed of new faces”. Recent opinion polls have placed Bukele ahead in the race with 44%-50% support, with Carlos Calleja second on 15%-22%.

  Of course, the emergence of a new presidential challenger who can capture the support of a majority of voters does not of itself guarantee an ability to adopt successful policies and to see them through to the execution stage. But the case of El Salvador highlights the importance of fresh thinking across all of the Northern Triangle to tackle the sub-region’s deeply embedded problems.