Q and A: What Needs to be Done to Tackle Corruption in Central America

President Obama recently unveiled a 2016 fiscal budget proposal that includes an additional $1 billion in aid to help reduce crime and improve governance across Central America. In what is probably the most full-throated justification of the program to date, Vice President Joe Biden wrote in an op-ed for The New York Times that the three-fold increase in aid amounts to a Plan Colombia for Central America. With six million youth across the region set to enter the workforce by 2025, now is a crucial time to break the spiral of poverty and violence. Once the security situation improves, Biden noted, pro-market reforms could take hold and deliver solid economic growth throughout the region. In the Vice President’s words, it would “help Central America become an embodiment of the Western Hemisphere’s remarkable rise—not an exception to it.”

Yet, so far there has been scant response from legislatures to the proposal, and even if the 114^th Congress quickly votes to approve the aid to Central America, enacting the spate of reforms will take time. In truth, Colombia’s present-day success owes a great deal to the willingness of a generation of public officials to set aside political differences and shun quick fixes for the sake of building a trustworthy judiciary, effective police force, and competitive economy. Similar results in Central America will demand the ongoing commitment of presidents, congressmen, judges and police officers across Honduras, El Salvador, Guatemala and elsewhere, over a period of years.

So, what hurdles do policymakers and foreign investors face as the region searches for ways to reduce drug violence and foster economic development? To unpack this question, Nearshore Americas talked to Manfredo Marroquin, Board Director at Acción Ciudadana in Guatemala City.

Nearshore Americas: Could you provide a brief overview of corruption in Central America and the impact this has on society and the economy?

Manfredo Marroquin: Corruption in Central America has resisted the introduction of democracy, and its general reach in countries like Honduras and Guatemala threatens the stability of governments there. Corruption has been the key to the introduction of drug trafficking, and many corruption networks and illegal businesses find cover and impunity for their activities.

NSAM: How has corruption changed across the region in recent years?

Marroquin: From classical corruption in public administration, where bribes were the usual, we have moved to a form of structural corruption whose source and main engine is political corruption through campaign finance of political parties. This corruption has distorted many of the functions of the state, because in practice its resources are used to provision overvalued contracts and ensure protection and impunity for financiers of political campaigns.

NSAM: What hurdles do foreign investors face because of corruption?

Marroquin: Most foreign investment is concentrated in the southern countries of Central America (Nicaragua, Costa Rica and Panama) where corruption has not acquired the dimensions of the northern triangle (Guatemala, Honduras and El Salvador). In the latter set of countries foreign investment is low, largely in response to problems of insecurity, violence, poverty and corruption.

NSAM: What programs or initiatives show promise in curbing corruption?

Marroquin: At the regional level there is no integrated and unified program against corruption. Nationally each country tries different models, although with modest of no results in most cases. It has been standardizing step-by-step anti-corruption legislation, such as laws on access to public information and confiscation of property obtained through unlawful means of corruption. But implementation depends heavily on the institutional strength of each country.

NSAM: The White House recently announced a new aid program for Central America, part of which will be directed at improving governance. What are the key elements that need to be met in order for that program to be effective?

Marroquin: Among other challenges, the aid program announced by the Obama administration has to isolate funds that are offered in the use of patronage or corruption. Both Honduran and Guatemalan governments move in an environment of hyper corruption, and agents that promote corruption remain very active. So, in order for these funds to achieve the expected results, the Obama administration will have to carefully select the partner agencies and offices in each of the recipient countries. Billions of dollars of international cooperation have been invested in the last 20 years with almost zero results, so the injection of new funds must have very effective safeguards against the actors that have made the northern triangle a paradise of corruption and impunity for corrupt business.