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Loans in the balance as international community weighs corruption in Guatemala

A banner left by Guatemalan prosecutors at ranch seized in a corruption probe reads "Evidence." Guatemalan prosecutors are working with foreign counterparts in the International Commission Against Impunity In Guatemala to stem corruption.  Lorne Matalon/ for Marketplace

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Guatemala’s economy depends on international loans and investment, and those loans are typically tied to progress against corruption. A U.N.-backed commission, the International Commission Against Impunity in Guatemala, known by its Spanish acronym CICIG, is working to stem entrenched corruption in Guatemala. But its work is under threat from the current administration, which has implications for a country that is home to Central America’s largest economy.

Since late August, many Guatemalans have railed against their president, former TV comedian Jimmy Morales. With no political experience, Morales won the Guatemalan presidency in 2015 campaigning on the slogan “Neither corrupt nor a thief.” That slogan was a reference to the previous president, Otto Pérez Molina, who is in jail  (and facing trial) on charges by U.N.-backed prosecutors in a massive bribery case.

In late August, President Morales declared the U.N.’s top prosecutor in Guatemala, Iván Velásquez, persona non grata, ordering his expulsion. The expulsion order was announced on national television two days after the prosecutor announced a probe into the president’s campaign finances. The expulsion was ultimately blocked by the courts.

Amidst allegations of corruption, anti-government protests are growing, and the potential for political instability is sending a signal to international lenders and foreign investors that has the potential to damage the Guatemalan economy.

“Many of our basic public services like health and public transport, they work because they have the support of the the international community,” said Gabriel Wer, one of the leaders of the civil society group, Justicia Ya (Justice Now.) “We have to have anti-corruption strategies in place,” he added.

Guatemala receives loans from groups like the World Bank and the Inter-American Development Bank, entities that tie their loans to progress against corruption. In an email, Guatemalan Central Bank President Sergio Recinos stated those loans are secure for now given that loans from those two banks have been awarded through the end of fiscal 2018. However Recinos added that that “protracted political tension” might translate into other investors delaying their plans for Guatemala until the current crisis subsides.

“Loans are going to affect the way government works in the short term,” said Guatemalan economist Roberto Wagner, the country’s former consul in London. “And we may have a crisis because of that.”

This case is being watched across the Americas. In the last two years, current and former presidents in Argentina, Bolivia, Brazil and Peru have been targets of fraud allegations. In Guatemala, the U.N.-led prosecution forced the unprecedented resignation of a sitting president, Pérez Molina, in 2015. Polls show widespread support for the commission’s anti-corruption agenda.

In the United States, members of both major political parties have criticized the decision by Guatemala to attempt to expel prosecutor Velásquez. U.S. Ambassador to the United Nations Nikki Haley, stated, “We expect the Guatemalan government to allow CICIG to do its critical work without interference. Fighting corruption is essential to the future security and prosperity of Guatemala.”

U.S. Vermont Democratic Senator Patrick Leahy, Vice Chair of the Senate Appropriations Committee said in a statement, “The eligibility of the Guatemalan Government for assistance from the United States, and of its officials to enter the United States, is at risk.”

In addition, Democrats and Republicans on the House Foreign Relations Committee have asked the State Department to reconsider assistance to the Guatemalan government because of ongoing corruption and the threat against CICIG.

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