Caribbean & Central America - March 2023

The latest Global Corruption Perceptions Index (CPI), by Berlin-based anti-corruption NGO Transparency International (TI), released on 31 January, revealed that Costa Rica had dropped four points since 2021, receiving its second-lowest rating ever - the most significant drop of any country in the region. While Costa Rica remains among the least corrupt countries in Latin America, the fall in rankings, which TI’s regional advisor for the Americas, Luciana Torchiaro described as a “warning”, highlights a key priority for the administration led by President Rodrigo Chaves which took office in May 2022.

The latest CPI showed that Costa Rica scored 54 out of 100 (where 0 means ‘highly corrupt’ and 100 ‘very clean’), down from 58 in 2021. While Costa Rica surpassed the average CPI score for the Americas (42) – the only country in Central America to do so - this is the country’s second worse score after registering 53 in 2013. The same index showed Costa Rica ranking 48 out of 180 countries, a drop of nine places on the previous 2021 rankings.

According to TI’s report on the CPI, recent corruption scandals in Costa Rica point to transparency deficits, overpricing and a lack of competition in the infrastructure sector, which it describes as a trend that can be seen across the region. Torchiaro told specialist website InSight Crime in a report published on 2 February that this was an allusion to the so-called ‘Cochinilla’ scandal, which broke in June 2021 (under the previous government led by Carlos Alvarado, 2018-2022). This was a corruption scheme involving construction companies and public works officials which cost the government some ₡78bn (US$126m) in public funds. CPI and Torchiaro also attributed the recent results to the allegations of illegal campaign financing during Chaves’ electoral campaign [SSR-22-06]. Speaking to Insight Crime, Torchiaro was clear that Costa Rica “needs to redouble its anti-corruption efforts, especially to prevent the possible penetration of drug trafficking in politics” – comments which come as Costa Rica registered record homicides last year which has been linked to the same issue [SSR-23-02].

Blacklisted by EU

Costa Rica also received a setback with the European Council’s 14 February announcement that it had added Costa Rica to its list of non-cooperative jurisdictions for tax purposes – a list of jurisdictions which are “non-cooperative on tax matters”. According to an EC statement, for the first time since the list was established, in 2017, Costa Rica is included because it has not fulfilled its commitment to “abolish or amend the harmful aspects of its foreign source income exemption regime (criterion 2.1)”. Latin America & Caribbean territories which remain on the list include Anguilla, Bahamas, British Virgin Islands, Panama, Trinidad & Tobago, Turks & Caicos Islands and US Virgin Islands.

Elsewhere

Predictably, given the democratic backsliding in other countries in the sub-region, Costa Rica’s Central American neighbours fared badly in TI’s latest CPI. The worst performer was Nicaragua where President Daniel Ortega has continued to dismantle democratic institutions and crackdown on dissent, scoring 19 out of 100, (-1 on 2021) and ranking 167 out of 180 countries (down from 164). This was followed by Honduras (23 and 157, unchanging in both cases) and Guatemala (24, down 1 on 2021 and ranking 150, unchanging) where TI cites “evidence suggesting organised criminals wield a strong influence over candidates and politicians, financing electoral campaigns or even running for public office themselves”. In the case of Honduras, TI says extortion of small businesses and ordinary citizens by criminal gangs is a significant problem that goes unpunished, citing estimates that Hondurans pay US$737m per year on extortion, representing 16% of Honduras’s annual GDP. TI also criticises the response by the leftist Partido Libertad y Refundación (Libre) government led by President Xiomara Castro aimed at tackling the issue – the suspension of constitutional guarantees through a state of emergency [SSR-23-01] - which it warns concentrates power in the executive, reducing transparency and accountability.

In the case of Guatemala, TI highlights the co-opting of justice institutions and the criminalisation of actors who report corruption – reiterating familiar complaints about attacks on independent judicial officials and journalists [SSR-23-01]. El Salvador, which under President Nayib Bukele has seen a crackdown on gangs which has suspended constitutional guarantees and, as TI describes “triggered unjustified arrests and abuses of power”, scored 33 out of 100 (down one place on 2021, ranking 116 (down one place on the previous year) while Panama remained “stagnant”, scoring 36 (unchanging) and ranked 101 (up four places on 2021).

Panama

TI notes that Panama’s 2022 score is a drop of two points on the CPI since 2012 and highlights that its inability to improve its score from 2021 reflects “poor institutional conditions to fight corruption and end impunity, particularly in cases of grand corruption”. It highlights the wave of protests which rocked the country between July and August 2022 [EB-22-08] sparked by the rise in living costs which TI describes as “an organic response to public institutional corruption and unjustified growth of the government payroll”.