Graft-Busting Goes Into Reverse in Central America

It’s the last place in Latin America that can afford to fall behind in that struggle.

Latin America’s war on corruption is something to celebrate. In the last few years, 11 presidents have either been driven from office or forced to answer in courts of law for crooked dealings. In a virtuous feedback loop, citizen outrage over official transgressors has emboldened the call for integrity in government.

For a region that has winked at scoundrels, this is remarkable. So, too, is the shift in the public conversation, which suddenly is all about transparency, due diligence, open government and corporate accountability.

Yet that progress has also brought something of a whiplash. Brazilian lawmakers on February 5 reinstated a shady colleague whose mandate had been suspended last year by the Supreme Court. Peru’s ethically challenged congress defied President Martin Vizcarra by stonewalling his anti-corruption reforms and then attempted to stack the Constitutional Tribunal with friendly judges. Vizcarra responded by dissolving congress. Colombians twice came up short on anti-corruption reform, first in a landmark 2018 referendum that failed to garner enough votes, and again last September when congress voted down the same measures. Transparency International  has found that despite the civic revolt for clean government, most Latin Americans believe that corruption remains unabated.

The pushback is most blatant in Central America, where a barnacled elite in politics and business has defied investigators and courts. Guatemala’s government shut down its pioneering independent team of investigators, the International Commission Against Impunity in Guatemala (CICIG), last September. Three months later, Honduras declined to renew the mandate for the analogous Mission to Support the Fight Against Corruption and Impunity in Honduras (MACCIH).

The collapse of both missions raises tough questions for champions of clean government: How to pursue criminal networks in societies where public sentiment is willing but institutions are weak? And what happens when those least interested in the letter of the law sit in the highest offices?

Both concerns had earlier driven Honduras and Guatemala to launch their signature anti-impunity initiatives, albeit a decade apart. CICIG dates to 2006, when the Guatemalan government tasked the United Nations to create an independent commission to take down criminal gangs and shadow security groups implicated in human rights violations during the drawn-out civil war. As peace and democracy evolved, the panel shifted its focus to corrupt networks operating within the state. Its findings led to the purge of hundreds of crooked cops and the conviction of scores of high-profile officials. The commission worked closely with the chronically underfunded Guatemalan prosecutors to expose a customs fraud network and bring down the vice president and eventually President Otto Perez Molina.

Inspired by Guatemala’s investigators, Honduras announced its own investigative panel in 2016 to tackle political corruption. Although MACCIH operated with less clout and autonomy than CICIG, and under the auspices of the more congenial Organization of American States, its investigators went on to expose entrenched corruption schemes, including an embezzlement ring at the heart of the Honduran congress — although lawmakers maneuvered to smother the scandal by taking over the investigation.

Investigators in Honduras and Guatemala hit a wall when their corruption probes reached the presidential palaces. Guatemalan President Jimmy Morales escalated his war with CICIG after the panel helped national prosecutors bring charges of fraud against Morales’s brother and son, and later accused Morales himself of illegal campaign financing. The backlash in Honduras came shortly after President Juan Orlando Hernandez saw dozens of his associates and cabinet officials fall under the scrutiny of MACCIH, and his own brother accused (and later convicted) in the U.S. for being a “large-scale drug trafficker.”

Speculation is rife over why, despite massive popular support, the maverick crime-busters came up short. One theory, popular in high office, is that the impunity sleuths succumbed to and even welcomed mission creep. In their defense, CICIG’s investigators noted that the civil war thugs it originally targeted had reinvented themselves in peacetime as political grifters, shielded by sitting authorities.

Another complaint had it that prosecutors overreached, essentially becoming avengers. While Guatemala’s imported prosecutors were not empowered to prosecute cases or make arrests, they enjoyed operational independence and tremendous discretion to launch investigations and collect evidence. Their accountability to international donors and sponsors — CICIG to the United Nations and MACCIH to the Organization of American States — rather than national authority gave offended parties an excuse to invoke that old Latin American chestnut, the threat to national sovereignty.

Like many lousy explanations, each of these arguments also has some truth to it. CICIG arguably made unnecessary enemies by overplaying its hand. It also may have failed at political branding by neglecting to convert popular applause into strategic alliances to continue its mission.

Justice by parachute is risky business — as risky as it is necessary in countries where the rule of law is the law of those who rule. Now that Honduras and Guatemala have cashiered their imported sheriffs, the legacy of these unfinished anti-impunity missions is unclear. One hopeful development is that the rot at the top appears to have strengthened resolve down below. “The public is now fully aware of the mechanisms of illegal campaign finance, corruption involving nongovernment actors, and how contracts can be thrown and subverted,” said American University professor Charles Call, who has studied CICIG’s rise and fall.

Despite their ignominious dismissal, CICIG and MACCIH left a wider footprint, inspiring El Salavadoran President Nayib Bukele and Ecuador’s Lenin Moreno to create their own similar panels.

Less encouragingly, crooked operators may now feel emboldened. After the Constitutional Court disqualified the candidacy of the graft-busting former attorney general Thelma Adana, Guatemala’s presidential runoff last year came down to a contest between two candidates clouded by corruption scandals. “It shows how difficult it is to create the rule of law, in places penetrated by illicit networks and deep corruption in the state,” Call added. “There’s real concern that ongoing cases will be rolled back and that a backlash will follow. It could be a heyday for corruption in the next couple of years.” Perhaps it’s no coincidence that as perceptions of corruption have risen, faith in Latin American democracy has waned.

That backsliding is bad for more than just the two troubled Central American nations. While Mexican President Andres Manuel Lopez Obrador has spun fighting corruption into a policy headline, he also has downgraded oversight, overlooked graft in high office and attacked the media. Nor did Bukele do his bold, anti-graft reform agenda any favors by dispatching the armed forces into the chambers of El Salvador’s contrarian congress. Menacing democracy is no way to root out bad actors at the top.

It’s hardly news that criminal violence and blighted economies drain wealth and stunt opportunities at home. Corruption’s toll may be less obvious, yet it too fuels the exodus by stunting development, bilking public coffers and forcing people to deal with crooked cops, impartial justice or bureaucrats on the take. Central America forfeits up to $13 billion a year to graft and tax evasion.

Not long ago, Washington understood the connection, and committed funds, advisers and diplomatic backing to Central America. “You need to build institutions to fortify governments, including a strong judiciary to go after corruption,” said Giancarlo Morelli, who watches Central America for the Economist Intelligence Unit. “The key ally in this effort has always been the international community, especially the United States — until now.”

Under Trump, the U.S.’s southern gaze has drifted from building institutions to raising walls and concertina wire. That shift has not been lost on Honduras and Guatemala, whose governments won Washington’s blessings for endorsing a harder line on migration and drugs, even as they sabotaged the international graft-busters. (It didn’t hurt that Guatemala became the first nation to follow Trump in switching its Israeli embassy from Tel Aviv to Jerusalem.)

All that good will to gringos won’t curb the bandits in power anymore than it will deter those heading north to seek haven from their criminal web. In this way, the collapse of the integrity agenda in Central America is also a U.S. scourge in the making.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Mac Margolis at mmargolis14@bloomberg.net

To contact the editor responsible for this story:
James Gibney at avalbrun@bloomberg.net