Guatemala

Guatemala Corruption Report

 

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Snapshot

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Corruption represents a major obstacle for businesses operating or planning to invest in Guatemala. Businesses must contend with high risks in almost all sectors. The Penal Code (in Spanish) criminalizes passive and active bribery, the bribery of foreign officials, embezzlement, and extortion. The government generally implements the relevant laws effectively. However, government officials engage in corruption with impunity, and recent years have witnessed several corruption cases, the biggest of which ended in the impeachment and imprisonment of former President Otto Pérez Molina. Facilitation payments are prohibited by law. Bribery and gifts are a widespread practice in Guatemala.

Last updated: August 2016
GAN Integrity

Judicial System

Businesses dealing with the judiciary face a high corruption risk. Bribes and irregular payments are often exchanged to obtain favorable decisions, and the courts suffer from political interference (GCR 2015-2016). Furthermore, judicial corruption and ineffectiveness have contributed to the institution’s inefficiency and long delays in the handling of cases (ICS 2016). Business executives perceive the courts to be inefficient in settling disputes and in challenging regulations, and judicial decisions are inconsistent (GCR 2015-2016; ICS 2016). Foreign companies do not face any discrimination when dealing with the judicial system (ICS 2016). Enforcing contracts is significantly more time-consuming in Guatemala compared to the regional average, taking 1,400 days (DB 2016).

In a 2015 corruption case, the Supreme Court lifted the immunity of Magistrate Marta Sierra de Stalling to later arrest her for taking bribes from attorneys of six members of an alleged tax fraud scheme in return for their release on bail (HRR 2015). The case is pending (HRR 2015).

Guatemala is a member of the International Centre for Settlement of Investment Disputes (ICSID) and is a signatory to the New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Police

Businesses dealing with the security apparatus face a high corruption risk. The police are corrupt and lack the resources to operate effectively (ICS 2016; HRR 2015). Impunity is reportedly high, and the government lacks the mechanisms to investigate corruption (HRR 2015). Recent years have seen several reports of police extortion and other abuses (FitW 2015). Guatemala is hobbled by a weak rule of law and high crime rates, and businesses do not perceive the police to be reliable in protecting them from crime or in enforcing order (ICS 2016; GCR 2015-2016).

The military is sometimes used by the government to maintain internal security and policing, and in recent times a pattern of military personnel exploiting their networks for corrupt and illegal purposes has emerged (HRR 2015; BTI 2016). In one case in 2014, the UN-backed International Commission against Impunity in Guatemala (CICIG) accused retired military Captain Byron Lima Oliva of building a multimillion-dollar empire from controlling the Guatemalan jail system and taking bribes in return for prison transfers (Yahoo News, Sept. 2014). The Public Prosecutor’s Office initiated 12 investigations into Lima, yet none reached the courts. CICIG investigations revealed a far-reaching corrupt network including congressmen and public officials, and Lima reportedly often bragged about his close relationship with President Otto Perez Molina (Yahoo News, Sept. 2014,

Public Services

The public services sector carries a low risk of corruption. Bribes and irregular payments are not widespread in the process of obtaining public utilities (GCR 2015-2016). However, access to public services highly depends on power relations, and corruption hinders the functioning of administrations (BTI 2016). Regulatory systems are opaque and confusing (ICS 2016). Businesses complain of burdensome administrative procedures (ICS 2016). Obtaining permits and licenses includes lengthy processes and bureaucratic hurdles (ICS 2016). Even though foreign companies are in principle not discriminated against, inconsistencies and bureaucratic hurdles give local companies more familiar with these challenges an advantage (ICS 2016). Starting a business is less time-consuming and less costly than the regional averages (DB 2016).

The government has developed a website (Asisehace.gt) to help with business registration procedures (ICS 2016).

Land Administration

Property rights are well defined; nonetheless, a poor rule of law has negatively affected property rights in practice (BTI 2016). Guatemala lacks a land registration system, creating an obstacle to landowners and paving the way for abuses, fraud, and illegalities (BTI 2016). Registering property is less time-consuming and less costly compared to regional averages (DB 2016).

Tax Administration

The tax administration carries a moderate-to-high corruption risk. Companies sometimes give bribes when meeting with tax officials (GCR 2015-2016). Despite this, paying taxes in Guatemala is less time-consuming and less costly than the regional average (DB 2016).

Customs Administration

The customs administration carries a very high risk of corruption. Companies complain of high levels of corruption in customs transactions, even more so in ports and borders outside the capital (ICS 2016). Corruption is much more pervasive when dealing with importing than when exporting out of the country (GETR 2014). More generally, import licensing requirements are an obstacle to investment (BTI 2016).

In early 2015, a corruption case involving former president Otto Perez Molina, former vice-president Roxana Baldetti and a number of other politicians led to country-wide demonstrations and the impeachment of the president. Investigations into what became known as the Linea (telephone line) corruption case revealed that Molina had set up a customs corruption ring with the help of high-ranking officials from the customs and tax administrations (The New Yorker, Sept. 2015). A phone conversation between Molina and Bladetti was released in which Molina was contacting the Tax Administration Superintendency director and asking the HR department to accommodate the smuggling network (Telesur, Sept. 2015). Between May 2014 and February 2015, the corruption ring, which controlled several customs offices and the central customs administration, benefitted from substantial bribes in exchange for the lowering of customs duties on a minimum of 500 containers, charging between GTQ 20,000 and 100,000 and embezzling more than GTQ 2 million in bribes per week. Molina and Baldetti have both been in pre-trial custody since May 2015 (Latin America Herald Tribune, 25 Apr. 2016; ICS 2015).

Public Procurement

The public procurement sector carries a high corruption risk. Bribes and irregular payments are often exchanged in the procurement process (GCR 2015-2016). Furthermore, companies believe that funds are often diverted to companies and individuals due to corruption (GCR 2015-2016). There have been complaints from businesses about public procuring entities structuring requirements of tenders to favor particular foreign companies over others (ICS 2016).

All procurement contracts exceeding USD 117,570 must be submitted for public competitive bidding (ICS 2016). Nonetheless, companies have complained that government entities have been applying special-purpose mechanisms to large procurement contracts, which allows the procuring entity to avoid competitive bidding through the public tender process and make direct purchases from a pre-selected supplier (ICS 2016).

In mid-2015, a high-level corruption case involving Guatemala’s Social Security Institute was brought under the spotlight by the CICIG and the chief prosecutor. Investigations led to the arrest of 17 individuals including the Institute’s president, Juan de Dios Rodriguez (International Justice Monitor, May 2015). Reportedly, the Institute had fraudulently awarded a USD 15 million public contract to the pharmaceutical company Pisa to ensure renal dialysis to social security patients in return for more than 15% commission and bribes to the board members (International Justice Monitor, May 2015). Pisa did not comply with the minimum requirements of the contract and lacked the required resources and capacity. All board members were jailed (International Justice Monitor, May 2015).

Natural Resources

Guatemala is a compliant country to the Extractive Industries Transparency Initiative (EITI). Recent years have witnessed several conflicts over land titles related to mining and hydropower exploration (BTI 2016).

Legislation

Guatemala has a legal anti-corruption framework in place, and the government generally implements the law effectively (HRR 2015). Guatemala’s Penal Code criminalizes active and passive bribery, fraud, extortion, using public resources for private gain, and bribery of foreign officials. Criminal penalties for those who commit corruption while in public office (e.g., by charging commissions, influence peddling, illegal appointments and passive and active bribery) include sentences ranging from five to ten years’ imprisonment and fines (Latin Lawyer, May 2015). Money laundering is criminalized by the Anti-Money Laundering Law. Public officials receiving salaries above USD 1,040 per month are subject to financial disclosure laws, and non-compliance can incur administrative and criminal sanctions (HRR 2015). Financial declarations are available to the public upon request (HRR 2015). The Asset Recovery Law allows the Guatemalan courts to seize goods and assets derived from illicit activities (including corruption, embezzlement, misappropriation of public funds, extortion, trafficking, and money laundering).

In 2015, several public officials in Guatemala engaged in corruption: The Public Ministry reported the arrest of approximately 602 public officials during the year for their involvement in corruption and abuse of office (HRR 2015).

Guatemala has ratified the UN Convention Against Corruption, OAS Inter-American Convention Against Corruption, and the UN Convention against Transnational Organized Crime.

Civil Society

Freedoms of speech and press are protected by law, but increasing violations of these freedoms have raised concerns among international organizations (FotP 2015). Libel and defamation are criminal offenses, and authorities and other prominent persons sometimes use these laws to silence the press (FotP 2015). The newspaper El Periodico is struggling with more than 70 legal complaints and has faced 15 cyber attacks, mainly as a consequence of investigations into government corruption (FitW 2015). In 2015, two journalists were killed, allegedly for their work on corruption and organized crime in several municipalities in Mazatenango (HRR 2015). The bribery of journalists is also a problem in Guatemala (FotP 2015). The law provides for public access to government information, however, in practice it remains difficult to obtain information, particularly for journalists reporting on corruption outside the capital (FotP 2015). Journalists and reporters have encountered several attacks from public officials, who face no consequences (FotP 2015). The government does not restrict access to internet or censor content; however, reports suggest authorities monitor private online chat (HRR 2015). This environment has led to widespread self-censorship among journalists; accordingly, Guatemalan media is considered “partly free” (FotP 2015).

Overall, civil society traditions are weak in Guatemala (BTI 2016). There is little cooperation between the government and civil society organizations (BTI 2016). Several activists have been victims of threats, attacks, and intimidation (HRR 2015). The law provides for freedom of assembly, and the government generally respects this right in practice (HRR 2015).

Sources

The site provides a wealth of practical anti-corruption resources to support a solid preventative approach, covering subject such as processes, due diligence, practical tools to support compliance program implementation and also compliance and integrity training.

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