The US presidential elections are already swinging the pendulum for Latin America in significant ways. The fear that the US will now revert to protectionism lead to a major sell off across different asset classes. The Mexican Peso tumbled to 20-years lows and has hardly recovered as of yet, pulling down the entire region. After an initial quick fall the Dollar bounced hard and is currently trading at multi-month highs. This has exacerbated the devaluation of Latin American currencies, which are traded against the Dollar.
Apart from the financial fallout, geopolitical consequences of Trump’s future policies have appeared as well. Now that Trump has confirmed he will not support the Trans-Pacific Partnership, potential members like Chili, Peru, Mexico and Colombia will likely beef up their bilateral economic relations in order to compensate for TPP. Peru already stated to foresee bilateral negotiations with Australia and New Zealand. Argentina, very open to free trade, will receive $4.1 billion in investments from Canada. This is about half the amount expected from US companies through 2019. A more protectionist approach by Trump could bring that amount down and leave the door open for Canadian companies to fill the gap. Withdrawal from NAFTA could exacerbate this and will constitute extra incentive for Latin American countries to strengthen bilateral relations with other geopolitical powers. Peru, which has strong historic ties with China, already trades more with China than with the US, a development that could potentially spill over to increased security and military cooperation. President Kuczynski’s pull to China is very clear: “We hope to tap into new markets in China, especially for agriculture. We are also interested in cooperation on science and technology. Furthermore, cultural exchanges and cooperation in archaeology and climate change are also very important for us.” It remains the question whether the US will look on from the sidelines if Russia and China increase their influence in Latin America.
Interregional relations are likely to strengthen as well, given Trump’s veiled threats to Central American countries on the topic of immigration. Whether the US will build a wall or will significantly increase deportations of immigrants, Honduras, Guatemala and El Salvador have said to form a bloc with Mexico to deal with the US under Trump leadership. However, with regards to Mexico, it is likely that organized-crime competition will increase, as a result of traffic restrictions and stricter border controls. In this scenario, conflict over control over the remaining open crossings would lead to increased violence. Violence in border cities like Ciudad Juarez and Tijuana is already on the rise. The second security consequence for Mexico stems from the influx of deportees, who would have few employment opportunities in Mexico. They could provide a ready pool of labour for criminal organizations. Central American cooperation is said to increase collaboration on jobs, investments and migration.
It remains to be seen as to which direction the pendulum will eventually swing, however, for the moment significant financial, economic and security consequences are already visible in Latin America.
The drug lord Joaquin “El Chapo” Guzman has been recaptured 6 months after his escape from a Mexican maximum security prison. On January 8, Mexican marines and federal police forces detained El Chapo during a raid in the city of Los Mochis, in the north-western state of Sinaloa. 6 gang members were arrested and another 5 were killed in the raid. A Mexican police spokesman said the US Drug Enforcement Administration and US Marshals helped in El Chapo’s arrest. El Chapo’s right-hand man was also captured in the raid. The Navy also reported that Orso Ivan Gastelum Cyz, a suspected gang leader, managed to escape. Mexican President Enrique Pena Nieto said Guzman’s arrest was a “victory for the rule of law”.
According to Mexican authorities, an interview that actor Sean Penn conducted with Joaquin Guzman last year helped the government to catch El Chapo. Mexican marines and police officials became aware of the meetings between Sean Penn and Joaquin Guzman in October 2015 and monitored Penn’s movement, helping lead them to the area where Guzman was hiding. Guzman managed to escape, but the operation in the northern state of Durango was a major breakthrough in the hunt.
On July 11, Guzman escaped from Altiplano maximum-security prison through a tunnel. According to the national security commissioner, his escape route was more than 1.5 kilometres long and had ventilation and stairs. More than 12 prison guards and federal police officials were arrested on charges of helping Guzman escape.
Guzman’s July escape was his second; in 2001, El Chapo escaped from another prison in Jalisco state by hiding in a laundry basket after bribing prison officials. He had been serving a sentence of more than 20 years after being arrested in Guatemala in 1993.
Concerned that Joaquin Guzman could escape for a third time, Mexican authorities have increased the security measures at his prison. The floor of his cell has been reinforced and a guard has been placed on his door 24/7. The new adopted measures also include reducing the number of inmates, increasing the number of cameras and moving Guzman randomly to different cells of the prison.
On January 10 2016, the Mexican government formally started the extradition process to the United States of Joaquin Guzman. According to the Mexican attorney general’s office, Interpol served 2 extradition warrants in an attempt to have Guzman face US justice. El Chapo faces charges ranging from money laundering to drug trafficking, kidnapping and murder. He faces criminal proceedings in 7 US courts.
Judge Miguel Angel Galvez has ruled that former Guatemalan president Otto Perez Molina will face trial on corruption charges, after being detained last Friday following the loss of his diplomatic immunity. He will remain in prison as the country heads into a runoff election to find his successor.
On Tuesday this week, Judge Galvez determined that there were “sufficient indications” that Perez Molina had been involved in a scam in which importers paid bribes to public officials in exchange for reduced tariffs. In a series of recorded conversations played during Tuesday’s hearing, former vice president, Roxana Baldetti was heard to implicate Perez Molina in the scam by referring to him as “number 1”, “chairman of the company,” and “owner of the estate.” Baldetti, who continues to maintain his innocence, was arrested last month on charges of illicit association, fraud and graft. Perez Molina – a former general who was elected in 2011 on an anti-corruption platform – has also denied allegations of wrongdoing and until late last week had refused to resign, despite mounting pressure from within his own government. In a pre-recorded address to the nation Perez Molina said: “I will not resign and…I categorically reject any link (to the scandal).” But after a judge ordered his detention over the allegations levelled against him the 64 year old submitted his resignation, ostensible to “maintain the institution of the presidency and resolve on his own the legal proceedings levelled against him”. His decision was accepted in a unanimous vote by congress, who afterwards swore in Alejandro Maldonado to act as caretaker president until January next year.
The fraud in which Perez Molina has been implicated was first revealed in April by the UN-backed International Commission against Impunity in Guatemala, otherwise known by the Spanish acronym CICIG. The investigation has led to the imprisonment of almost forty people and the birth of a vast grassroots movement, which has seen thousands of people take to the streets of Guatemala demanding the resignation of the President. Since its creation in December 2006 the CICIG has shone a light on endemic corruption in Guatemala. It has worked on nearly 200 cases and has helped bring charges against numerous criminal networks and around 200 politicians, police officials and military officers.
Guatemala’s government is thinning with a string of high-profile resignations and arrests of top officials following the revelation of a corruption scandal inside President Otto Perez Molina’s administration. Massive protests gathering thousands of Guatemalans have been organized via social media in order to demand the President’s resignation. This is the first time in Guatemala’s recent history that a broad cross section of society including students, politicians, the country’s powerful business lobby, indigenous peoples, and members of a historically passive middle class, joined together in a unified call for the removal of corrupt officials.
The initial scandal that sparked public anger involves a criminal network that has been called La Linea (The Line), in reference to a certain mobile phone number importers called to negotiate the amount they paid in customs taxes. Thanks to this network, businesses could receive an illegal discount on the required fees when their property cleared customs. About 50% of the balance was then paid to the state. The rest went to a network of defrauders that included corrupt officials and their collaborators.
On April 16, Guatemalan authorities arrested 22 people including the current and former heads of Guatemala’s tax collection agency. This 8-months investigation was the result of a joint effort between the International Commission against Impunity in Guatemala, a UN-backed institution charged with investigating and helping disband clandestine and parallel power structures linked to the state, and Guatemala’s Public Prosecutor’s Office. Prosecutors estimate that Guatemala lost at least $120 million in tax revenue just in the 8-months period to the scam. As the investigation continues to unfold, it has also revealed an inter-connected web of judicial corruption that’s been nicknamed the “Law Firm of Impunity”, resulting in investigations into judges and justices on Guatemala´s Supreme Court. Iduvina Hernandez, a political analyst and the executive director of the Association for the Study and Promotion of Security in Democracy said: “the parallel power structure that has been revealed through the CICIG’s investigations is derived precisely from the existence of a larger pact of impunity.» In the case of La Linea, top officials and individuals allegedly raked in millions in dollars per year while state institutions lacked important resources for education, medicine, and basic security.
Additionally, just a week later a second investigation by CICIG and the Public Prosecutor’s Office revealed another corruption scandal within Guatemala’s Social Security Institute. The institute had awarded a kidney dialysis contract to the company Drogueria Pisa in exchange for kickbacks to government officials, including IGSS employees as well as the head of the Guatemalan Central Bank. Pisa had no expertise providing the treatment, and 13 have died since. A total of 17 public officials have been arrested, but most notable has been the arrest of the president of the board of the IGSS, Juan de Dios Rodriguez who was a powerful former military man and who once served as President Perez Molina’s private secretary.
Such corruption scandals within the government and at different levels triggered massive movements of demonstrations and rocked President Perez Molina’s administration. Vice President Roxana Baldetti was the first to step down, handing in her resignation on May 8. Although she wasn’t implicated in the initial corruption investigation, she was plunged into controversy when her private secretary, Juan Carlos Monzón Rojas, was identified as the leader of the fraud ring. Shortly after her resignation, Baldetti was also placed under investigation. As investigations continue, high-level officials in a number of major executive branch offices have resigned or been fired.
Moreover, President Otto Pérez Molina has dismissed or asked for resignations from his chief of intelligence, the ministers of the environment and of energy and mines, and his interior minister, among others. Many of the ousted officials are members of Pérez Molina’s inner circle and are under investigation for various acts of alleged corruption.
However, these ministry shake-ups have not been enough to quell calls for the president’s resignation and demonstrations continue to fill Guatemala’s streets. The crisis is playing out ahead of presidential elections in September, with polls giving a large lead to Manuel Baldizón, a populist right-wing tycoon. This is the deepest political crisis of the post-war era in Guatemala. But it remains unclear whether it will eventually strengthen or dangerously undermine the country’s still-feeble democracy. On June 10, Guatemala’s Supreme Court accepted a petition to allow Congress to decide whether to revoke President Perez Molina’s immunity from prosecution for possible involvement in acts of corruption. President Perez Molina has stated that he will not resign in spite of the public movement against him. The situation in Guatemala is currently highly flexible and many scenarios could play out in the coming weeks.