GUATEMALA: Private sector takes issue with Morales government

November 28, 2017

Latin News

Last week Movistar, the local branch of Spanish telecommunications firm Telefónica SA, was compelled to take the unprecedented step of suspending its customer service operations for a couple of days after a string of deadly coordinated attacks on its employees, linked to extortion carried out by local gangs. The attacks have reignited private sector complaints regarding the failure by the Frente de Convergencia Nacional (FCN-Nación) government led by President Jimmy Morales to guarantee security for business. They come amid other concerns regarding the current business climate in the country, caused in part by the political crisis stemming from the calls made at the end of August for Morales to be investigated for corruption.

The local press published transcripts of two supposed conversations between a Movistar employee and an individual seeking to extort US$13,600. In a report published by the national daily Prensa Libre on 11 November, Juan Carlos Tefel, the president of Guatemala’s chamber of industry (CIG), was cited as saying that extortion affecting the private sector was up 25% in the last three years, with losses amounting to some Q220m (US$30m) a year. In a statement issued two days later, the influential private sector lobby Comité Coordinador de Asociaciones Agrícolas, Comerciales, Industriales y Financieras (Cacif) complained that extortion is a problem which affects companies and their employees on a daily basis and called on the authorities to guarantee security for businesses in order that “investment opportunities are not lost”.

That the Morales government is floundering in its efforts to address extortion (see sidebar) was suggested in a report published two months earlier by a leading local human rights organisation, Grupo de Apoyo Mutuo (GAM). The GAM report cites interior ministry figures which revealed that complaints regarding extortions reached a record 7,127 in 2016 (the year that Morales took office), up 141% on 2015, and equivalent to 43 per 100,000 inhabitants. The GAM report also noted that, in the first five months of 2017, 3,119 complaints had been reported. While recognising that this rise could stem from public awareness regarding the need to report complaints in the first place, the GAM also points out that this suggests more incidents of extortion are taking place.


As well as calls for President Morales and the national legislators to be investigated for corruption, Codeca also called for the mayor of Guatemala City, Álvaro Arzú, a former president (1996-2000), to be investigated for the 1998 murder of Bishop Juan Gerardi – one of the most notorious crimes committed during the 1960-1996 civil war. Last month Cicig and the attorney general’s office called for Arzú to be investigated over a case known as ‘Pandora’ – a corruption network headed up by the country’s most famous prisoner, General Byron Lima Oliva (later killed in a prison riot in 2016).


Also serving as cause for private sector concern is unrest stemming from public frustration with official corruption. This has been ongoing since August following calls by the International Commission against Impunity in Guatemala (Cicig) and the attorney general’s office (AG) for Morales to be investigated over irregular campaign financing. This anger then intensified after the legislature voted not to strip Morales of his immunity from prosecution, instead approving two reforms of the criminal code weakening existing anti-corruption legislation (since repealed following public outrage) [WR-17-34].

With this crisis already having had an impact on the country’s business climate, as evidenced in the recent downgrade by international credit ratings agency Standard & Poor’s [WR-17-42], one of the biggest shows of popular unrest in recent weeks took place on 7 and 8 November. In protests organised by the indigenous organisation Comité de Desarrollo Campesino de Guatemala (Codeca), thousands reportedly staged blockades on at least 14 different key points across the country. Unlike previous protests, these turned deadly, with Codeca reporting that a local protester had been stabbed to death in San Antonio Ilotenango municipality, El Quiché department, when leaving his house for the march. The chamber of industry (CIG) condemned the blockades and called on the authorities to take appropriate action, while Cacif filed a complaint before the AG against Codeca accusing it of various crimes, including attacks against transport, sedition, inciting protests, and instigating crime.

Escobal uncertainty persists

The private sector has also expressed discontent over the business climate, citing the lack of legal guarantees: on 8 November Cacif called on the constitutional court (CC) to issue a definitive ruling on the Escobal silver mine (owned by Minera San Rafael [MSR], a subsidiary of Canada’s Tahoe Resources). Located in Santa Rosa department, the mine is one of the largest in the world. In July 2017, in a victory for local anti-mining groups such as Centro de Acción Legal Ambiental y Social (Calas), the supreme court (CSJ) provisionally suspended MSR’s mining license [WR-17-27] amid complaints that the mining & energy ministry (MEM) had violated the Xinca indigenous people’s right of consultation ahead of granting the license for Escobal in 2013. In September, the CSJ ruled that MSR could resume operations, albeit while ordering the MEM to carry out a consultation with the local population within 12 months. However, Cacif complained in its statement that a lack of legal certainty persists, which is having an impact on the business climate and causing daily losses of Q1.1m (US$150,019) in taxes and royalties.

HRW report

As well as concerns regarding the failure to address security concerns such as extortion, the Morales government’s record on impunity also made headlines last week with the release of a new report published by the US-based NGO Human Rights Watch (HRW). Published on 12 November, the 56-page report, which is entitled Running Out the Clock: How Guatemala’s Judiciary Could Doom the Fight against Impunity, warns that “the fight against impunity in Guatemala has reached a critical moment”.

Documenting “a pattern of repeated and unjustifiable delays in criminal cases” brought by Cicig and the AG, the report highlights that since Cicig began operations in 2007, Guatemala “has made enormous progress in promoting accountability for abuses of power” – with the “most dramatic breakthrough” coming in 2015 with the exposure of the La Línea corruption scheme, prompting the resignation and arrest of President Otto Pérez Molina (2012-2015). However, the HRW report warns that “more than two years on, these prosecutions have joined a growing list of cases against powerful defendants in which criminal cases have been bogged down in pretrial proceedings, some for more than five years”. The HRW report, which extensively reviewed criminal proceedings in eight high-profile cases, found a consistent pattern “in which defence lawyers are able to trigger prolonged delays with repeated, often unjustified, appeals to court decisions and petitions seeking the recusal of judges”.

Response to extortion

In response to the renewed focus on extortion, Interior Minister Francisco Rivas said on 16 November that the fight against extortion remains a priority for the government. He said that the acquisition of 1,500 patrol cars had been finalised for the most “conflictive” areas in the country such as Villa Nueva and Mixco (both municipalities in Guatemala department) along with the department of Escuintla.

Contributor Biography

Latin American Newsletters (LatinNews) was founded in London in 1967 to provide expert political, economic, and security analysis on Latin America and the Caribbean. For nearly 50 years, it has been acknowledged as the foremost authority on the region.

Tags: guatemala, invest, investment, investors, latin, latin america, morales, political risk
Posted in LatAm, Politics Risk, Politics Risk