Analysts: Nick Agnew, Ryan Fitzgerald, Don Houston, and Ryan McCabe
Team Leader: Haliz Doskee
Crime and Drugs
Guatemala’s troubled and violent history is very much apparent in its high crime rate, weak judicial system, and widespread poverty. The sixty year civil war, ending in 1996, made violence a ubiquitous part of life for many Guatemalans, and saturated the country with a large number of firearms. While the legal gun ownership rate is roughly half that of Canada, some sources suggest that up to 60% of Guatemalans own a firearm. Poverty, a leading factor contributing to high rates of violent crime, is endemic throughout the country. Approximately 60% of the population lives below the poverty line — among indigenous populations, poverty rates are thought to be significantly higher. The prevalence of violent crime is shocking, with brazen mid-day robberies and assaults are common throughout the country’s major urban areas, even in upscale tourist areas. Foreigners commonly report armed robbery, extortion, carjacking, rape, kidnapping, and murder.
Unfortunately, Guatemalan police forces are unable to cope with the sheer volume of crime. At its peak in 2014, there were an average of 69 murders per week in Guatemala. With underpaid, underfunded, and understaffed police forces, the judicial system has shown an inability and unwillingness to combat crime. There have been multiple reports of crimes perpetrated by police or assailants dressed as police officers. Due to the inaction of the police, there have been reports of violent vigilantism, particularly in rural indigenous communities. Guatemala is a major drug trafficking staging area for powerful cartels. This is due to Guatemala’s strategic location on the south border of Mexico, and its lack of effective policing, making the country a major transportation route for cocaine. This circumstance has only exacerbated violent clashes with police, increased criminal activity in major urban centers, and increased gang activity. Moreover, even if profits from drug trafficking were substantially diminished, the strong hold of established gangs and criminal activity would only seek out other illicit income sources.
The International Commission against Impunity in Guatemala continues to arrest and charge more suspects from the mafia state established under former President Otto Perez Molina, his Vice President Roxana Baldetti and their party, the Patriotic Party as a whole. This illustrates how even after the arrests of the two main “kingpins” potential corruption and organized crime cases continue to shake the foundations of Guatemala. This should obviously be a red flag of sorts for investors as it was expected the new regime would be one where corruption and organized crime were minimized which would ensure safe investments. This unfortunately does not appear to be the case as new cases are continuing to arise such as one connecting an extradited drug trafficker to the current vice president and a corruption scandal connected to the current president’s son and his brother. This is clearly a cause for concern as this new regime was expected to have much more stability and less corruption, which is proving to maybe, not be the case. Investors need to be extremely diligent with a) which companies they get involved with and b) which government officials. Getting mixed up with an official or a company who later on is involved in one of these scandals is a good way to ensure your investment in Guatemalan renewable energy does not succeed.
Adding to these concerns are rumors that Molina and Baldetti are still running their criminal organizations while incarcerated. Given the proven abilities of Guatemalan elites to co-opt state institutions and the notorious corruption of Guatemala’s prison system it is not out of the question that this is occurring. Allegedly Perez Molina “gives orders” from his apartment-jail and “maintains good relations with judges, congressmen and advisors to current president Jimmy Morales. As long as corrupt structures maintain power within state institutions investors have legitimate reasons to be concerned with investing in renewable energy in Guatemala. It creates a potentially tumultuous environment for investment and the security needed to justify an investment may not be there.
While the above concerns certainly highlight an ineffective policing unit, lack of judicial reform, and unwilling government it certainly does not mean investment should not occur. The issues highlighted above means that investors need to ensure they do not take shortcuts in the vetting and research process. Investors looking to invest in both long term and short term ventures need to investigate their future business partners. Good business practices and ethics may allow companies to work around the corruption still stemming from the former “mafia state.” Fortunately as of yet, there have not been any confirmed cases of renewable energy investors becoming mixed up with these criminals, corrupt business leaders, or malfeasant politicians.