Monday, October 3, 2011
Central America's Future Lacks Promise without the Rule of Law
By Jaime Daremblum
It is election season in Central
America. On September 11, while the United States was marking a somber anniversary, Guatemalans were heading to the polls
to pick their next president. No candidate received a majority, so there will be a two-way runoff vote on November 6.
The favorite to emerge victorious is conservative Otto Pérez Molina, a retired general
and former military intelligence chief, who led all candidates with 36 percent support in the first round. The same day that
Guatemalans choose between Pérez Molina and centrist businessman Manuel Baldizón, Nicaraguans will decide whether
Sandinista leader Daniel Ortega gets another five years in the presidential palace. Most expect that Ortega will cruise to
reelection, though Nicaraguan politics is wildly unpredictable, and we should not rule out a late surprise.
The outcome in Guatemala will determine how a beleaguered and polarized citizenry responds
to an escalating security crisis. The outcome in Nicaragua may lead to a further erosion of constitutional democracy. In each
case, the presidential winner on November 6 will be charged with governing one of the poorest countries in the Western Hemisphere.
Yet despite their deeply entrenched poverty, both Guatemala and Nicaragua have enormous untapped potential. With better political
leadership and better public institutions, they could be much richer.
starters, the two countries boast an abundance of tourist attractions, including volcanoes, mountains, rain forests, and beaches.
Guatemala also has magnificent Mayan ruins (most notably, the ruins of Tikal), and Nicaragua is home to famous Spanish colonial
cities such as Granada and León. Guatemala is a major sugar and banana exporter; Nicaragua is a major beef exporter;
and both are major coffee exporters. Since 2006, Guatemala and Nicaragua have enjoyed preferential access to U.S. markets
under the Central American Free Trade Agreement. Each country has a young, fast-growing population, and each could become
a very appealing destination for foreign investment.
Indeed, the United
Nations Conference on Trade and Development believes :
the potential to become the main hub for FDI in Central America, given its macroeconomic stability, the size of its internal
market, a geographical location facilitating trade and competitive labor costs.
Meanwhile, foreign investment in Nicaragua has increased by 77 percent over the past five years, according to the
Miami Herald . "Foreign investors see plenty of opportunities," reports  The Economist.
"Levi's jeans and parts for BMW cars are among the things already made there, tempted by Nicaragua's low costs."
Unfortunately, both countries face serious hurdles to greater economic development and faster
poverty reduction. Guatemala has witnessed a surge of violent crime, thanks to deadly youth gangs and Mexican drug cartels
(particularly the organization known as Los Zetas). Its homicide rate is more than twice as high as Mexico's, and the
cartels are effectively controlling substantial chunks of Guatemalan territory.
According to a 2010 study  by security analyst Hal Brands, "the influence of nonstate criminal actors rivals
or exceeds that of the government in up to 40 percent of the country." Things got so bad late last year that President
Álvaro Colom declared a state of siege in the northern province of Alta Verapaz, which borders Mexico. He made the
same declaration for Petén (another northern border province) this past May, following a massacre by Los Zetas. "In
the first seven months of 2011," notes  the U.S. State Department, "approximately 42 murders a week were reported
in Guatemala City alone."
Pérez Molina says he will crush
organized crime with an "iron fist," and his blunt, no-nonsense message has struck a chord with Guatemalans weary
of all the violence. Critics allege that he committed human-rights abuses during the long Guatemalan civil war (which began
in 1960 and did not end until 1996). Thus far, however, no hard evidence has emerged to implicate the ex-general, who considers
his past military service a valuable asset to his political career. "I regard it as an advantage that the 30 years I
was in the Army gave me the opportunity to know the whole country, to live inside, to be close to the problem," Pérez
Molina recently told  the Christian Science Monitor. "The training, discipline, order are important attributes
when you're in government and need to make decisions."
the only sustainable long-term solution to violent crime in Guatemala is stronger, more responsible public institutions -
especially improved police forces and a better judicial system. In the World Economic Forum's latest Global Competitiveness
Index  (GCI), Guatemala ranks 132nd out of 142 countries and economies for the quality of its public institutions. It ranks
dead last for overall security, 129th for the business costs of terrorism, and 138th for the reliability of police services.
According to Guatemalan executives, crime is easily the most problematic factor for doing business in their country, followed
by corruption and inefficient government bureaucracy.
Compared with Guatemala,
Nicaragua has relatively low crime rates. But it suffers from rampant corruption, and President Ortega is attempting to resurrect
a Sandinista dictatorship. Indeed, he has made a mockery of the rule of law: In 2008 the Sandinistas stole municipal elections,
and in 2009 they used authoritarian tactics to override term limits and allow Ortega to launch an unconstitutional reelection
campaign. (The Nicaraguan constitution explicitly forbids presidents from seeking reelection.) In the 2011-12 GCI, Nicaragua
places 130th for the quality of its public institutions (barely ahead of Guatemala). Transparency International has ranked
it  as one of the most corrupt countries in Latin America.
It is a
nation where anti-Ortega journalists face increasing harassment. Consider the story of Silvia González, a writer for
the newspaper El Nuevo Diario. After reporting on the strange death of former Contra fighter José Gabriel
Garmendia - whose quixotic armed rebellion against the Ortega government came to an end last February, when he was shot dead
by Nicaraguan security forces - and also on Sandinista corruption, González began receiving menacing phone calls from
thuggish supporters of the ruling party. Terrified by their threats, she recently fled to Miami. "I am afraid that they
will kill me," she told  the Associated Press. "That is why I left."
Ortega is clearly not a true democrat, nor is he a true friend of capitalism. Yet he has adopted pragmatic economic
policies in order to appease the Nicaraguan business community . The Sandinista leader has also benefited from massive
Venezuelan investment and oil subsidies, thanks to his ideological comrade Hugo Chávez.
But Chávez has cancer, and Venezuela politics is highly unstable. After traveling to Managua this past March,
Miami Herald columnist Andres Oppenheimer summed up  the general consensus among the Nicaraguans with whom he
spoke: "If Chávez fell, or Venezuela stopped sending subsidized oil, or the IMF stopped making emergency loans,
or commodity prices fell, Ortega's government would collapse." Oppenheimer pointed to a hard truth about the
country's future: "Sooner or later, Nicaragua will have to make a national agreement to respect the rule of law,
or it will never emerge from poverty and despair."
Such an agreement
would greatly boost Nicaragua's long-term economic prospects. Likewise, better legal institutions would help Guatemala
reduce gang and drug violence, which has taken a significant toll on GDP growth. But these changes will only come about if
the two countries elected far-sighted political leaders committed to real democracy. Voters should remember that when they
head to the polls on November 6.
URLs in this post:
 believes: http://www.unctad.org/templates/WebFlyer.asp?intItemID=5927&lang=1
 Miami Herald: http://www.miamiherald.com/2011/04/07/2157897/central-american-free-trade-pact.html
 reports: http://www.economist.com/node/21526908
 study: http://www.strategicstudiesinstitute.army.mil/pdffiles/PUB986.pdf
 notes: http://travel.state.gov/travel/cis_pa_tw/cis/cis_1129.html#safety
 told: http://www.csmonitor.com/World/Americas/2011/0911/Guatemala-election-Rising-crime-positions-Otto-Perez-Molina-for-victory
 Global Competitiveness Index: http://gcr.weforum.org/gcr2011/
 ranked it: http://www.transparency.org/policy_research/surveys_indices/cpi/2010
 told: http://old.news.yahoo.com/s/ap/20110924/ap_on_re_la_am_ca/lt_nicaragua_journalist_threats
 appease the Nicaraguan business community: http://pajamasmedia.com/blog/ortega%E2%80%99s-cynical-strategy/
 summed up: http://www.projo.com/opinion/contributors/content/CT_nica22_03-22-11_OCN294C_v18.1f42cba.html
 here: http://pajamasmedia.com/blog/pobreza-y-posibilidades-en-america-central/
Ambassador Jaime Daremblum is a senior fellow with the Hudson Institute, in Washington, D.C., where he directs the Center for Latin American Studies. This piece, "Poverty and Potential in Central America," first appeared in the Pajamas Media on Sep. 29, 2011. Republished with permission.