Good morning. Let me welcome our virtual audience from across the region and say thanks to the Association of American Chambers of Commerce in Latin America and the Caribbean (AACCLA) and the Rule of Law Coalition for inviting me to speak today.
I am honored to share this virtual stage with a wide range of speakers from across Central America, the private sector, and the OAS, as well as Chamber representatives and my colleague in Guatemala, Ambassador William Popp. And thank you to all the speakers on the agenda who are joining us today to share their first-hand experiences using digital tools.
The Biden Administration envisions a Central America with stronger institutions, greater rule of law, improved security, and less corruption and impunity – a region where its citizens can live in peace and security, find work, and lead lives of dignity. Along with civil society and all branches of government, the private sector can and must be a key partner in this endeavor.
With economies around the world in decline due to the pandemic, it is critical to pursue innovative solutions like digital tools to combat corruption and promote much needed growth and investment. This is especially true in the Americas. Increased digitalization will help economies attract more investment and support the resuscitation and flourishing of small- and medium-sized businesses.
I want to briefly touch on three topics this morning: key governance challenges, creating a more enabling economic environment, and the ways digitalization can advance our shared objectives.
President Biden has committed to a strategy that provides 4 billion dollars over four years, to address the root causes of irregular migration from Central America. A primary focus of that strategy will be to combat corruption, which as we know, drives insecurity, poverty and hopelessness due to the scarcity of opportunity in the region. Governments that are willing to embrace a legitimate anticorruption agenda, one that favors transparent processes and responsive institutions, will have the United States as their partner. And let me say again, civil society and the private sector are critical allies in this fight.
My State Department colleagues and I were pleased to hear that the AACCLA Rule of Law Task Force plans to focus on Central America this year. In particular, we are very interested in the concept of commercially relevant corruption – specifically the corruption that breeds uncertainty and inefficiency, and prevents companies from wanting to do business in Central America.
The good news is that Central America has several competitive advantages, including democratic institutions, young populations, an established U.S. trade and investment track record, and free market principles that can drive efficiency if protected. Unfortunately, widespread corruption often negates these advantages.
We have seen Central American government officials investigated for corruption, some forced from office, and some even sent to prison. However, in most cases, corruption goes unpunished and unchecked, spreading through society like a wildfire and weakening economic opportunity.
It’s no surprise that polls show the public in Central America, as well as the private sector, believe corruption is pervasive in the region. It is clear that corruption causes many investors to avoid Central America altogether, because risk and uncertainty have outweighed opportunity. It is up to the countries in this region to turn that dynamic around and create a fertile ground for economic growth, investment, and job creation.
Sectors across society must show the political will to tackle these problems boldly, directly, and effectively. Governments must work to root out corruption and improve transparency in key areas such as the budget and procurement. Companies and local Chambers of Commerce must signal they will not accept corrupt practices and must demand progress toward transparency.
Civil society partners and the press have to hold governments and the private sector accountable. In turn, governments should embrace accountability and protect the rights of civil society members and journalists who do this important work. These collaborative and mutually-reinforcing efforts can improve the business environment, create opportunity, raise wages, and increase tax revenues.
Just as the government and the people of the United States expect our companies to refrain from engaging in corrupt practices at home and abroad, we believe our neighbors can and should set high expectations within their borders and beyond. If we want economies to grow, companies need to exemplify the same high standards we want our governments to emulate.
So, how can the private sector and other partners help governments create and sustain an enabling economic environment in the region? Businesses and investors create jobs. They develop and fund technologies and drive innovation. They provide critical goods and services, and perhaps most important, they provide a reliable tax base that fills government coffers and funds government salaries and projects. The private sector has the leverage to demand the kind of transparent, level playing field that allows investors to make smart decisions that pay off.
Business associations, like the Chamber, can give voice to these demands.
From the U.S. government perspective, we can encourage the U.S. private sector to invest where we see our regional partners taking concrete actions to curb corruption and strengthen rule of law – these are the environments that are good for business, and that attract sound and sustainable investment.
One of the key levers the U.S. government can use is the U.S. International Development Finance Corporation. The DFC is committed to catalyzing $1 billion dollars in Guatemala, Honduras, and El Salvador. And this money is already working. In partnership with the Central
American Bank for Economic Integration, small- and medium-sized businesses, including women-owned businesses, are getting the liquidity they need to stay open and to grow. DFC investments are also supporting major infrastructure projects in Honduras and elsewhere.
With this influx of investment from DFC and the private sector, it is even more necessary for countries to ensure they have the capacity to handle routine business practices such as licensing, permitting and procurement. This depends, in part, on transparency and simplifying these processes.
Which brings us at last to how digital tools can help formalize economies and make investing more reliable and transparent.
We need to do away with laborious, paper-based processes, and move basic government services online – thereby reducing the chance for corrupt actors to elicit bribes on the side.
Digitizing provides the critical foundation for the transparency we need to improve business climates and access to essential services. Once governments move beyond paper and onto computers, it is just a small step to digitize processes, allowing government auditors and public watchdogs easy access, and giving companies and the public, the confidence that everyone is getting a square deal.
We recognize that each nation in Central America faces unique challenges to modernization. For example, in some cases e-commerce, or onerous customs procedures hinder progress. We also know it’s not enough to simply put paper-based processes online. Governments, businesses, and civil society groups must work together to ensure the systems are secure, data is protected, and appropriate oversight is in place.
These are big undertakings, but the good news is people are making progress across the region. Today we will hear what is working and how the private sector and other partners can provide the incentives to promote the necessary reforms and then share best practices and functioning models.
You are not alone in this effort. The United States stands ready to support digital transformation.
In closing, let me reiterate a key point: private sector-led growth will not happen unless we resolve rule of law challenges. A strong U.S. government and private sector push, combined with partner governments’ efforts to root out and prevent corruption is at the core of creating a more enabling economic environment in the region. Digitalization is one way to think outside of the box, but there are others and we want to hear your ideas.
When the U.S. and Central American governments, local communities, and private sector actors collaborate, we can lift people out of poverty, strengthen communities, and build a region that provides hope to all of its people.
Thank you for your attention this morning. I look forward to an engaging discussion today.