Caribbean & Central America - January 2015 (ISSN 1741-4458)

Last month Guatemala’s ruling Partido Patriota (PP) faced various corruption allegations – both relating to the approval of the national budget but also over alleged illegal contributions from Brazilian construction company, OAS, to the campaign of the PP’s pre-presidential candidate, Alejandro Sinibaldi, ahead of the September 2015 general elections.

The allegations involving OAS’s contributions broke on 16 December 2014 when Brazilian daily, Valor Económico, published documents found in the OAS offices, following a raid conducted as part of investigations into Brazil’s state-run oil company, Petrobras. According to the documents, US$1m was handed, in 20 instalments of US$50,000, to Spanish publicist, Antonio Solá, one of the directors of President Otto Pérez Molina’s campaign in 2011. Such was the impact of the allegations that on 22 December President Pérez Molina suspended official relations with Brazil’s national development bank (Bndes), which had provided some of the funds allegedly delivered to Solá until “everything had been clarified”. The next day Pérez Molina cancelled a Bndes loan worth US$340m for the expansion of four highways in Guatemala.

Sinibaldi, who is currently polling second in pre-electoral surveys, behind Manuel Baldizón of the main opposition Libertad Democrática Renovada, (Líder), and Solá, who also served as advisor on the campaigns of other political figures like Mexico’s former president Felipe Calderón (2006-2012) and Spain’s Prime Minister Mariano Rajoy, deny the allegations. But if these prove to be true it would leave Sinibaldi in breach of Guatemala’s 2007 electoral law, which prohibits political organisations from receiving any foreign campaign contributions whether from individuals, State entities or businesses. The only exception is contributions from authorised academic institutions or foundations for training purposes, which must be reported to the supreme electoral court (TSE) within 30 days.

Other transparency complaints

With local civil society groups like Acción Ciudadana (AC) demanding that the TSE and the attorney general’s office launch an investigation into the allegations, the PP has also faced accusations of corruption over the approval of the national budget which was ratified by 106 votes in the 158-member unicameral legislature on 28 November 2014.

Approval of the national budget is traditionally a tortuous process in Guatemala (the previous year, the legislature failed to meet the 30 November deadline meaning that the previous year’s Q$66.98bn [US$8.41bn] budget was rolled over). The ease with which this year’s budget – for Q$70.6bn (US$9.2bn) - was approved, following a deal between the PP which has 44 seats and Líder which has 52, consequently aroused suspicion from AC as well as private sector organisations like the chamber of commerce (CCG); umbrella private sector lobby group, Comité Coordinador de Asociaciones Agrícolas, Comerciales, Industriales y Financieras (Cacif); as well as the chamber of industry (CIG).

In a 3 December 2014 press release, the CCG flagged up the abolition of controls on assignations to NGOs. Also cited as a transparency concern, was the fact that the approved budget includes nearly Q$2bn (US$265m) for the communication, infrastructure & housing ministry, even though the precise destination or objective for these funds was not specified.

Another source of private sector complaints

Budget transparency is not the only concern for the private sector which has also been fuming over the introduction of three new taxes: a Q$5(US$0.65) monthly tax on landlines and cell phones; an increase in taxes on cement from Q$1.50 (US$0.20) to Q$5 (US$0.65) per quintal sack; and an increase in mining royalties, from 1% to 10%.

As regards the telecoms tax, while President Pérez Molina said this was exclusively for companies, private companies warned that consumers will ultimately foot the bill. Meanwhile, the national chamber of construction (CGC) complains that the new cement tax will increase construction costs by 6%, putting at least 20,000 jobs at risk this year. The rise in mining royalties, 9% of which will go to the central government and 1% to municipalities, has also prompted an outcry from local mining lobbies such as Gremial de Minas y Canteras and Canada’s Tahoe Resources (which owns the Escobal silver mine in San Rafael).

The private sector lobbies have moved to challenge the new taxes, with some success. On 30 December the constitutional court (CC) admitted an appeal presented on 18 December by the CIG along with telecommunications companies, Claro, Tigo and Telefónica, calling for the new tax on landlines and cell phones to be suspended on procedural grounds, until a definitive verdict is reached.

• Ríos Montt trial delayed again

Efforts to bring Guatemala’s former dictator, Efrain Ríos Montt (1982-1983), to justice have received a further setback. Although in May 2013 a local court convicted Ríos Montt of genocide and crimes against humanity committed during the 1960-1996 civil war, this ruling was overturned days later. A retrial was due to begin on 5 January but has been suspended after the court hearing the case accepted defence appeals that one of the judges was not impartial. José Miguel Vivanco, the Americas executive director of international NGO Human Rights Watch (HRW), told reporters that the latest decision“ is not only extremely frustrating but also is revealing of the lack of solid independence of the judiciary in Guatemala, which is clearly sensitive to political pressure”