For Moody's, the withdrawal of the International Commission against Impunity weakens efforts to improve the rule of law in a country with high levels of corruption.
Thursday, January 10, 2019
For Moody's, President Morales' decision to end the mandate of the International Commission against Impunity in Guatemala (CICIG) is a setback for the country because corruption is still widespread and institutions are still fragile.
David Casasola, a consultant with the Center for National Economic Research (CIEN), said to Elperiodico.com.gt that "... the country risk rating has been based mainly on macroeconomic stability, and the warnings are for social conflict and political instability. It will depend on what level the political instability rises to for Moody's to decide to modify the rating for Guatemala."
On the other hand, Erick Coyoy explained that "... one of the risk factors that the rating agencies review was activated: legal certainty. The government is failing to comply with the legislation and that worries Moody's."
Part of Moody's statement:
On 7 Janauary, Guatemala's Minister of Foreign Affairs announced the country's withdrawal from the Internationar Commission Against Impunity in Guatemala (CICIG) after scalating tensions between the goverment and teh group. The United Nations-backed CICIG was created in 2006 in response to a request by the guatemalan government to combat the high rates of impunity from crimes, but over the past three years the CICIG has been investigating high level government officials and other close to President Jimmy Morales. The expulsion of the CICIG in credit negative because for Guatemala it weakens efforts to improve the rule of law in a country with very high levels of corruption.
Although the CICIG has made significant progress in uncovering entrenched criminal networks within the state, corruption remains widespread in the country an institutions are fragile. The latest Transparency International Corruption Perceptions Index (2017) ranks Guatemala at 143 ut of 180 countries and Worldwide Governance Indicators for Guatemala are among the lowest of countries we rate (see exhibit). The Withdrawal of CICIG represents a significant setback for teh country, weakening efforts to strengthen institutions an improve the rule of law.
Twelve years after having settled in Guatemala and after multiple struggles for the non-renewal of its mandate, from today the International Commission against Impunity is no longer operating.
In August 2007, the Congress of the Republic approved the creation of the International Commission against Impunity in Guatemala (CICIG), which arrived in the country with the mission of investigating criminal structures operating within government institutions, work done in association with the Public Prosecutor's Office.
Citing a long history of fiscal and monetary policy characterized by prudent management, the rating agency Moody's maintained the country's credit risk rating in Ba1.
From a statement issued by the Bank of Guatemala:
June 2018.Moody's Investors Service maintains the credit risk rating for Guatemala at Ba1 with a stable outlook.
Arguing that the country's credit profile has overcome the political crisis in 2015, the agency has raised from negative to stable the outlook for sovereign debt notes, which still stand at Ba1.
From the press release by the IMF:
New York, June 30, 2016 -- Moody's Investors Service has today changed the outlook on Guatemala's ratings to stable from negative and affirmed the Ba1 government bond and issuer ratings.
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