Governments in Central America have long had difficulties accepting checks and balances on their power. But as complacent private sector leaders maintain their support for corrupt and violent regimes—so long as it helps their business—don’t expect democratic change anytime soon. The recent ascent of authoritarianism in Guatemala, Honduras, and Nicaragua is just the latest example of how elites’ continued backing of the status quo is one of the region’s top problems.
Power and violence
When violence broke out in April in Nicaragua, a novel feature of the opposition’s protests against the dictatorship of Daniel Ortega was that it included the country’s powerful private association. For over a decade, the Council for Private Enterprise (COSEP) and its members had enjoyed a cozy relationship with the Ortega government: they turned a blind eye to the regime’s slow-but-steady power grab in exchange for laws favorable to their commercial interests.
And while COSEP drew a red line as paramilitary forces started repressing protesters, their tepid rejection of Ortega’s dictatorship arrived too late.
For too long, industry leaders would argue that colluding with the regime was the only way to remain open for business. Perhaps they were right: even large multinationals were forced to pay bribes to start and maintain operations in the country. But red flags have been in place for years, and the outbreak of violence seems the logical conclusion of institutional drift.
Now COSEP is part of a broader alliance of organizations calling for Ortega to leave power. Still, it’s suspicious that all of the private sector is dedicating all of its might to ousting the current regime—even as he ruled out another pact of stability for private sector firms, its President, Jose Aguerri, did emphasize that prohibition is just “with this government”.
Is COSEP waiting for the fall of Ortega to return to their old ways? Are they fully aware that without corrupters there can be no corruption? Are they aware they are part of the problem?
Criminal networks and the private sector
A similar phenomenon is happening in Honduras, where President Juan Orlando Hernández made strategic efforts to consolidate his control of government power, leading him to reelection amidst widespread protests and cries of election fraud earlier this year despite a populace overwhelmingly opposed to reelection and a constitution that prohibits it. Weeks of protests were met with brutal repression and resulted in the deaths of over 34 people.
Hernández has merely played the cards in favor of his power grab. But the country is marked by a close intertwining of the private, public, and criminal sectors, all of which have captured the state to ensure it works in their favor.
Regular state capture—the kind you read about in economics textbooks—is nothing next to this kind of kleptocracy. Elites have increasingly established connections with the “out-and-out criminal networks” that run the drug business and other smuggling operations, as author Sarah Chayes writes in a report for the Carnegie Endowment for International Peace. These linkages reach deeper in Honduras, perhaps, but they are present throughout the region.
How, then, can we ensure that the private sector does not take part in a system in which corruption is not a bug, but a feature?
To allow for democratic change, anti-graft bodies including the International Commission Against Impunity in Guatemala (CICIG), backed by the United Nations, have sought to ensure criminal investigations can proceed with independence.
And while they have shown results in recent years, both CICIG and its watered-down Honduran counterpart have found this deeply entrenched power of traditional and emerging elites a strong obstacle to their work in bringing corruption to trial.
Reform Won’t Be Easy
At the time of publication, Guatemalan President Jimmy Morales has yet to deal the final blow to CICIG, which he appears ready to do even if it means undermining the independence of the Constitutional Court and the erosion of the country’s democratic institutions—all amidst complicit silence on behalf of the private sector.
Thanks to CICIG’s mandate, key private sector leaders have been under criminal investigation since 2015, and heads of the largest firms and business associations have been taken to court on allegations including illegal campaign finance, tax fraud, and fraud in the social security service. But these businessmen have been a slim minority of the of the accused, as around 650 corrupt officials, judges, lawyers, and citizens have been taken to court in four years of criminal investigations under CICIG’s watch, according to Nómada.
Business elites have been essential for maintaining Jimmy Morales’ grip on power, however, even if he’s under criminal investigation himself. Recently, Morales announced he will not renew the mandate of the Commission after 2019, and decided unilaterally not to allow its boss, Colombian Iván Velásquez, back into the country.
After magistrates of the Constitutional Court ordered him to dial back his orders, Morales has not only failed to comply, but has threatened to disobey the Court altogether. And business leaders, who for years have complained about the weak rule of law and the lack of legal certainty, have said nothing about Morales’ overt attempt to undermine the Guatemalan judicial system.
While groups representing almost every faction of society took to the streets to protest Morales’ disavowal of the Court, the head of the Chamber of Industry merely said government officials “must have their reasons” to disobey the Court’s sentence. And the private sector’s Coordinating Committee (CACIF) has also remained silent.
The latest troubling developments in Guatemala are part of a broader trend of the Central American business elite’s use of public institutions to guarantee returns on their businesses. But as the governments that have traditionally helped them secure these privileges turn violent and increasingly autocratic, the region’s business community has a fair share of the responsibility for the rise of conflict in the region.
