Things are Bad in Guatemala

The Otto Perez Molina administration appears to be disintegrating in time with the successive dismantling of networks of entrenched corruption at the highest level, jeopardizing the country's basic institutions.

Monday, May 25, 2015

EDITORIAL

There are very few occasions when political parties with different ideologies and civil groups with dissimilar origins in Latin America have teamed up to denounce the same cause, as is currently happening in Guatemala. The dismantling the corruption networks and what could still be "uncovered", is keeping in suspense a country where the last thing needed is the paralysis and putting in jeopardy of its already fragile institutions.

Guatemalan businessmen agree that this situation should be seen as an opportunity for a "clean slate", as suggested by the US ambassador in the country, Todd Robinson, who even "... considered it to be appropriate that the private sector - which should be intolerant of, and completely uninvolved in corruption -, assesses the integrity of all those citizens that this year aspire to be elected office into in 2016. "

And the negative effects have already begun to be felt. While Guatemalans last week crammed the streets, the rating agency Fitch Ratings began its assessment of the economy, reviewing the sovereign debt risk rating. At the same time, bonds in the international debt market lost 1.5%, "... the worst performance for an emerging country after Venezuela, according to JPMorgan Chase's EMBIG index" reported Estrategiaynegocios.net.

How can Guatemala solve this problem? Nacion.com reports that "... It matters little to which the protesters that the current government only has eight months left in power- its period, which began in January 2012 will theoretically run until 14 January 2016. The people want their poetic justice: they want to see the fall of the highest executive. The possibility is real. The Treasury Office of Guatemala has arrested 17 people linked to corruption scandals, including the directors of the Guatemalan Institute of Social Security, Juan de Dios Rodriguez, and the Bank of Guatemala -the official financial institution of the state, Julio Suarez. "

See: "Guatemala: Why this crisis is of interest to investors , "" An opportunity for Guatemala to improve its system "and" Guatemala: House of cards ".

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More on this topic

Effects of the Political Crisis on the Economy

October 2017

Standard & Poor's has reduced Guatemala's debt rating from BB to BB-, arguing that political instability and weakness in government institutions are affecting economic growth prospects.

A series of events that began earlier this year, when President Jimmy Morales declared the Commissioner of the International Commission against Impunity in Guatemala, Iván Velasquez a persona non grata, and which continued with the "Corruption Pact" made by 107 deputies to approve a reform of the Penal Code to favor politicians implicated in illicit financing and to extend commutative penalties is the main reason behind the reduction in the debt rating.

Guatemala: Moody's Upgrades Debt Rating Outlook

July 2016

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.

New President in Guatemala

September 2015

With the resignation of Pérez Molina and Alejandro Maldonado sworn in as president, the institutional crisis should moderate in its intensity.

From a statement by AmCham Guatemala:

After several months of political uncertainty in Guatemala it has been demonstrated that nobody is above the law and that the country's institutions are able to perform their job.

Institutional Crisis in Guatemala

April 2015

The dismantling of a network of corruption at the highest level in the Superintendency of Tax Administration has forced an analysis of the stability of the government of Otto Perez Molina.

Calderon raises three possible scenarios:

"...First scenario: precarious balance, which means continuing the current pace of deterioration in the political system and levels of governance, and at the same time assuming an increased fragmentation of the government bloc.

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