Belize
Executive Summary
Belize has the smallest economy in Central America with total gross domestic product (GDP) of USD 1.9 billion due primarily to continued increases in tourism. Though geographically located in Central America, the former British colony has deep cultural ties to the Caribbean. Due to mounting fiscal pressures and a need to diversify and expand its economy, the Government is open to, and actively seeks, foreign direct investment (FDI). However, the small population of the country (approximately 390,000 persons), high import duties, bureaucratic delays, corruption, and occasional political interference in private disputes constitute investment challenges.
Generally, Belize has no restrictions on foreign ownership or control of companies. However, foreign investors must adhere to Central Bank of Belize regulations relating to the inflow and outflow of investment. Small and medium sized enterprises (SMEs) and tour operators wishing to benefit from certain incentives must have 51 percent local ownership. The country also continues to fare poorly in international surveys of openness and ease of opening a business.
Key legislative reforms in 2018 advanced the intellectual property regime governing copyrights and industrial designs; strengthened the financial sector with regard to anti-money laundering and counterterrorism financing; sought to secure compliance with global regulations relating to taxation, and amended the operations of the offshore sector and export processing zones.
Overall, the economic and fiscal outlook will continue to face significant challenges. The country remains highly indebted with debt to GDP at approximately 94 percent. The government managed to gain some relief in the short term with the 2017 renegotiation of the country’s major external commercial debt—the so-called “Superbond 3.0”—totaling an estimated USD 554 million. Macroeconomic and fiscal vulnerabilities are expected to continue to relate to fiscal tightening, controlling the public sector wage bill, dealing with arbitration judgments, and advancing measures to stimulate private sector growth and economic development.
The financial system can be characterized as stable but fragile. While the domestic financial system continues to recover and improve performance ratios relating to non-performing loans and capital adequacy, correspondent banking relationships remain tenuous and tend to offer fewer services at higher costs. In the international banking sector, the Central Bank of Belize revoked the license of one international bank in June 2018 and another requested support in March 2019 to wind up voluntarily.
Despite the challenges, Belize remains attractive for some investors because of the beauty of its natural resources, the relative affordability of land, proximity to the United States, English language, and the cultural diversity and warmth of its people. Investors benefit from various incentive programs in key investment sectors including agriculture, agro-processing, aquaculture and fisheries, logistics and light manufacturing, offshore outsourcing, sustainable energy, and tourism and tourism-related industries.
Table 1: Key Metrics and Rankings
9. Corruption
Belize has anti-corruption laws that are seldom enforced. Under the Prevention of Corruption in Public Life Act, public officials are required to make annual financial disclosures. The Act also criminalizes acts of corruption by public officials and includes measures on the use of office for private gain, code of conduct breaches, the use of public funds, and bribery. Section 24 of the Act covers punishment for breach, which may include a fine of up to USD5,000, severe reprimand, forfeiture of property acquired by corruption, and removal from office. This Act also established an Integrity Commission mandated to monitor, prevent, and combat corruption by examining declarations of physical assets and financial positions filed by public officers. The Commission is able to investigate allegations of corrupt activities, including by members of the National Assembly, Mayors and Councilors of all cities, and Town Boards. In 2018, a new chair was appointed to the Commission and published 42 names of persons in public life in accordance with the Act.
The Money Laundering and Terrorism (Prevention) Act identifies “politically exposed persons” to include family members or close associates of the politically exposed person. The policies and procedures for government procurement are outlined in Belize Stores Orders and Financial Orders issued by the Ministry of Finance. There is a Manual for the Control of Public Finances that provides the framework for the registration and use of public funds to procure goods and services.
Despite these legislative and regulatory measures, many businesspeople complain that both major political parties can and do practice partisanship bias that affects businesses in terms of receiving needed licenses, winning government contracts for procurement of goods and services, and the granting of government land to private owners. Some middle-class citizens and business owners throughout the country have complained of government officials, including police and others, soliciting bribes. Additionally, there are allegations of prominent members from the two main political parties engaging in corrupt practices to acquire land. A Select Senate Committee on Immigration deliberated for most of 2017 on such allegations. It concluded its inquiry in December 2017, but has yet to publish its findings.
Private companies are not required to establish internal codes of conduct. There are few non-governmental institutions that monitor government activities; two of them are Citizens Organized for Liberty through Action (COLA) and the National Trade Union Congress of Belize (NTUCB). The first is comprised of concerned private citizens; the latter is an umbrella organization comprised of the various Belizean workers’ unions. Environmental NGOs and the Belize Chamber of Commerce and Industry often make statements regarding government policy as it affects their respective spheres of activity.
Private companies do not use internal controls, ethics or compliance programs to detect and prevent bribery of government officials.
In June 2001, the Government of Belize signed the Organization of American States (OAS) Inter-American Convention on Corruption, which undergoes periodic review as provided for under the Convention.
In December 2016, Belize acceded to the United Nations Convention Against Corruption (UNCAC) amid public pressure and demonstrations from the teachers’ unions but full implementation remains ongoing.
Bribery is officially considered a criminal act in Belize, but laws against bribery are rarely enforced. There are complaints of government corruption particularly related to customs, land, and immigration transactions.
Resources to Report Corruption
Contact for the government agency or agencies responsible for combating corruption:
Office of the Ombudsman
91 Freetown Road
Belize City, Belize
T: +501-223-3594
E: ombudsman@btl.net
W: www.ombudsman.gov.bz
For specific complaints within the police force:
Professional Standards Branch
1902 Constitutions Drive
Belmopan, Belize
T: +501-822-2218 or 822-2674
10. Political and Security Environment
Belize has traditionally enjoyed one of the most stable political environments in the region, having held peaceful and transparent democratic elections since independence on September 21, 1981. In general elections, the two major political parties generally trade leadership but the current United Democratic Party has held on to power since 2008 spanning three consecutive elections. At the municipal level, elections were held in March 2018 and while the opposition People’s United Party gained ground, the ruling United Democratic Party maintained its majority in six of the nine municipalities.
Incidents including damage to projects or installations affecting investments in Belize are rare. In November 2014, the Belize Sugar Cane Farmers Association (BSCFA) and American Sugar Refineries (ASR) failed to reach a contract agreement before the harvesting season. While the dispute was eventually resolved, there were some reports of fields being burned and farmers being threatened for breaking ranks with BSCFA.
There is political insecurity because of neighboring Guatemala’s territorial claim on Belize that has existed for almost two centuries. In 2008, both countries signed a special agreement, with the facilitation of the OAS, on a process to present the matter to the International Court of Justice (ICJ). After simultaneous referenda failed to materialize in 2013, Guatemala voted to take the matter to the ICJ in April 2018. Belize was scheduled to hold its referendum in April 2019, but the process is delayed by a legal challenge. Despite efforts to increase confidence building measures between the two countries, there continue to be incursions by Guatemalan citizens along bordering areas resulting in deforestation, illegal logging and extraction of exotic hardwoods, illegal harvesting of xate palm leaves (a decorative plant used in flower arrangements), panning for gold, wildlife poaching, and agriculture development. These activities have resulted in confrontations between Guatemalan nationals and Belize law enforcement authorities on Belizean territory. Tensions have also flared along the Sarstoon River, which forms the disputed southern border. Guatemala has increased its naval presence in the area and detained or questioned Belizean citizens wishing to navigate the river.
There are also security concerns related to the high level of crime, which are mainly gang related or random targets against innocent civilians and tourists. Turf and gang related crimes are often concentrated in south side Belize City.
Costa Rica
Executive Summary
Costa Rica is the oldest continuous democracy in Latin America with moderate but falling economic growth rates (4.2 percent in 2016, 3.4 percent in 2017, 2.7 percent in 2018) and moderate inflation (2 percent in 2018) providing a stable investment climate. The country’s relatively well-educated labor force, relatively low levels of corruption, physical location, living conditions, dynamic investment promotion board, and attractive free trade zone incentives also offer strong appeal to investors. Costa Rica’s continued popularity as an investment destination is well illustrated by strong yearly inflows of foreign direct investment (FDI) as recorded by the Costa Rican Central Bank, reaching an estimated USD 2.7 billion in 2017 (4.7 percent of GDP) and USD 2.1 billion in 2018 (3.6 percent of GDP).
Costa Rica’s technology and tourism sectors serve as “clusters” of economic growth in which each new exporter, service provider, sector employee, or university course of study adds depth to the sector as a whole and makes it more attractive for new entrants. Costa Rica has had remarkable success in the last two decades in establishing and promoting an ecosystem of export-oriented technology companies, suppliers of input goods and services, associated public institutions and universities, and a trained and experienced workforce. A similar transformation took place in the tourism sector, now characterized by a plethora of smaller enterprises handling a steadily increasing flow of tourists eager to visit despite Costa Rica’s relatively high prices. Costa Rica is doubly fortunate in that these two sectors positively reinforce each other as they both require and encourage English language fluency, openness to the global community, and Costa Rican government efficiency and effectiveness. Costa Rica’s ongoing accession to the OECD has also pushed the country to address its economic weaknesses through executive decrees and legislative reforms in a process that began in 2015.
The Costa Rican investment climate is nevertheless threatened by a high and persistent government fiscal deficit capable of squeezing domestic credit and forcing government budget cuts, a complex and often-inefficient bureaucracy, high energy costs, and basic infrastructure – ports, roads, water systems – in need of major upgrading. The Costa Rican business sector is feeling particularly buffeted in 2018 and 2019 by an unusual number of new requirements or challenges, stemming from the government’s anti-money laundering (AML) initiatives and continued efforts to address the fiscal imbalance through increased taxes. On the AML side, companies must register their beneficial ownership in a dedicated data base, banks will soon be using a single centralized Know-Your-Customer database to vet companies and individuals, and companies in industries identified as susceptible to money laundering activity will have their own registry and heightened reporting requirements. All retail businesses must now accept credit cards or other alternative digital payment and all income tax reporting entities must now issue electronic invoices through a system controlled by the tax authority. On the fiscal front, tax calculations change in a number of ways in 2019, including a sales tax previously applied just to goods replaced by a Value Added Tax of up to 13 percent that applies to services as well; modified tax brackets; an increase in the tax of dividends from cooperatives; and an expansion and increase of the capital gains tax.
Table 1: Key Metrics and Rankings
9. Corruption
Costa Rica has laws, regulations, and penalties to combat corruption. Though the resources available to enforce those laws are limited, Costa Rica’s institutional framework is strong, such that those cases that are prosecuted are generally perceived as legitimate. Anti-corruption laws extend to family members of officials, contemplate conflict-of-interest in both procurement and contract award, and penalizes bribery by local businessmen of both local and foreign government officials. Public officials convicted of receiving bribes are subject to prison sentences up to ten years, according to the Costa Rican Criminal Code (Articles 340-347). Entrepreneurs may not deduct the costs of bribes or any other criminal activity as business expenses. In recent years, Costa Rica saw several publicized cases of firms prosecuted under the terms of the U.S. Foreign Corrupt Practices Act.
Costa Rica ratified the Inter-American Convention Against Corruption in 1997. This initiative of the OECD and the Organization of American States (OAS) obligates subscribing nations to implement criminal sanctions for corruption and implies a series of follow up actions: http://www.oas.org/juridico/english/cri.htm . Costa Rica also ratified the UN Anti-Corruption Convention in March 2007, has been a member of the Open Government Partnership (OGP) since 2012, and as of July 2017 is a party to the OECD Convention on Combatting Bribery of Foreign Public Officials.
The Costa Rican government has encouraged civil society interest in good governance, open government and fiscal transparency, with a number of NGO’s operating unimpeded in this space. While U.S. firms do not identify corruption as a major obstacle to doing business in Costa Rica, some have made allegations of corruption in the administration of public tenders and in approvals or timely processing of permits. Developers of tourism facilities periodically cite municipal-level corruption as a problem when attempting to gain a concession to build and operate in the restricted maritime zone.
Resources to Report Corruption
Contact within government Anti-Corruption Agency:
Armando López Baltodano
Procurador Director de la Area de la Etica Publica, PGR
Procuraduria General de la Republica (PGR)
Avenida 2 y 6, Calle 13. San Jose, Costa Rica
Telephone: 2243-8330, 2243-8394
Email: RocioCHT@PGR.go.cr
Contact at “watchdog” organization:
Evelyn Villarreal F.
Asociación Costa Rica Íntegra
Telephone: (506) 8355 3762
Email 1: evelyn.villarreal@cr.transparency.org
Email 2: crintegra.vice@gmail.com
10. Political and Security Environment
Since 1948, Costa Rica has not experienced significant domestic political violence. There are no indigenous or external movements likely to produce political or social instability. However, Costa Ricans occasionally follow a long tradition of blocking public roads for a few hours as a way of pressuring the government to address grievances; the traditional government response has been to react slowly, thus giving the grievances time to air. This practice on the part of peaceful protesters can cause logistical problems.
Crime increased in Costa Rica in recent decades and U.S. citizen visitors and residents are frequent victims. While petty theft is the main problem, criminals show an increased tendency to use violence. Please see the State Department’s Travel Advisory page for Costa Rica for the latest information — https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories/costa-rica-travel-advisory.html
El Salvador
Executive Summary
The outgoing government of El Salvador (GOES) is generally perceived as unsuccessful at improving the investment climate. Political polarization, cumbersome bureaucracy, an ineffective judicial system, and widespread violence and extortion have all contributed to this perception. The GOES has taken some measures to improve the business climate, with very limited results. The most commonly cited impediments to doing business in El Salvador include the discretionary application of laws/ regulations, lengthy and unpredictable permitting procedures, and customs delays.
President-elect Nayib Bukele assumes office on June 1, 2019. He has pledged to support investors and make El Salvador a more attractive destination for investment. The incoming administration’s plans to improve the investment climate will be evident soon after Bukele takes office.
In 2015, El Salvador’s second Millennium Challenge Corporation (MCC) Compact entered into force. The five-year USD 277 million Compact (plus USD 88.2 million from GOES funding) seeks to improve El Salvador’s investment climate by improving its productivity and competitiveness in international markets. MCC Compact information is available at https://www.mcc.gov/where-we-work/program/el-salvador-investment-compact.
El Salvador began implementing the Simplified Administrative Procedures Law in February 2019. This law seeks to streamline and consolidate administrative processes among GOES entities to facilitate investment. In 2016, El Salvador adopted the Electronic Signature Law to facilitate e-commerce and trade, which is still pending implementation.
In August 2018, El Salvador recognized the People’s Republic of China and ceased to recognize Taiwan. El Salvador signed several memorandums of understanding (MOUs) with China, but has not entered into negotiations with China for an investment or trade agreement. Although the GOES announced the cancellation of its trade agreement with Taiwan in February 2019, the Supreme Court halted the cancellation in March 2019 and the agreement remains in force.
In November 2018, El Salvador officially joined the Northern Triangle Customs Union with Guatemala and Honduras following the ratification of the Accession Protocol by Legislative Assembly. The Customs Union inaugurated the first integrated border post in El Salvador in December 2018. Northern Triangle countries continue technical-level negotiations to operationalize the Customs Union, harmonize customs regulations and procedures, interconnect automated systems, and finalize which goods will freely move within the single customs territory. Full implementation of the Customs Union is targeted for 2020.
In recent years, El Salvador has lagged behind the region in attracting foreign direct investment (FDI). The sectors with the largest investment have historically been textiles and retail establishments, though investment in energy projects has been increasing steadily.
In November 2018, El Salvador and Bolivia signed a Partial Scope Agreement that is pending ratification in the Legislative Assembly. In 2018, El Salvador also ratified a free trade agreement (FTA) with South Korea, signed trade agreements with Cuba and Bolivia, and reinitiated long-stalled FTA negotiations with Canada.
In December 2018, El Salvador adopted the Regulatory Improvement Law (LMR), which establishes the Regulatory Improvement Institution (OMR), an MCC compact investment, as the government’s sole institution for regulatory reform. OMR will coordinate the regulatory improvement process and the simplification of business procedures and paperwork. In addition, El Salvador enacted the Law on the Elimination of Bureaucratic Barriers in December 2018 that creates a specialized tribunal to verify that regulations and procedures are implemented in compliance with the law. The new tribunal has the authority to sanction public officials who impose administrative requirements not contemplated in the law.
Table 1
9. Corruption
U.S. companies operating in El Salvador are subject to the U.S. Foreign Corrupt Practices Act.
Corruption can be a challenge to investment in El Salvador. El Salvador ranks 105 out of 180 countries in Transparency International’s 2018 Corruption Perceptions Index. While El Salvador has laws, regulations, and penalties to combat corruption, their effectiveness is at times questionable. Soliciting, offering, or accepting a bribe is a criminal act in El Salvador. The Attorney General’s Anticorruption and Anti-Impunity Unit handles allegations of corruption against public officials. The Constitution establishes a Court of Accounts that is charged with investigating public officials and entities and, when necessary, passing such cases to the Attorney General for prosecution. Executive-branch employees are subject to a code of ethics, including administrative enforcement mechanisms, and the government established an Ethics Tribunal in 2006.
Corruption scandals at the federal, legislative, and municipal levels are commonplace and there have been credible allegations of judicial corruption. Three of the past four presidents have been indicted for corruption, and a former Attorney General is in prison on corruption-related charges. The law provides criminal penalties for corruption, but implementation is generally perceived as ineffective. In 2017, a civil court found former president Mauricio Funes guilty of illicit enrichment and ordered him to repay over USD 200,000. In 2018, the Attorney General brought additional embezzlement and money laundering charges against Funes, who fled to Nicaragua in 2017, where he currently enjoys asylum. In March 2019, the Supreme Court unanimously approved the Attorney General’s December 2018 petition to request Funes’ extradition. In 2018, former president Elias Antonio (Tony) Saca pleaded guilty to embezzling more than USD 300 million in public funds. The court sentenced him to 10 years in prison and ordered him to repay USD 26 million.
The NGO Social Initiative for Democracy stated that officials, particularly in the judicial system, often engaged in corrupt practices with impunity. Long-standing government practices in El Salvador, including cash payments to officials, shielded budgetary accounts, and diversion of government funds, facilitate corruption and impede accountability. For example, the accepted practice of ensuring party loyalty through off-the-books cash payments to public officials (i.e., sobresueldos) has persisted across five presidential administrations. El Salvador has an active, free press that reports on corruption. In 2015, the Probity Section of the Supreme Court began investigating allegations of illicit enrichment of public officials. In 2017, Supreme Court Justices ordered its Probity Section to audit legislators and their alternates. The illicit enrichment law requires appointed and elected officials to declare their assets to the Probity Section. The declarations are not available to the public, and the law does not establish sanctions for noncompliance.
The law provides for the right of access to government information, but authorities have not always effectively implemented the law. The law gives a narrow list of exceptions that outline the grounds for nondisclosure and provide for a reasonably short timeline for the relevant authority to respond, no processing fees, and administrative sanctions for non-compliance.
In 2011, El Salvador approved the Law on Access to Public Information and joined the Open Government Partnership. The Open Government Partnership promotes government commitments made jointly with civil society on transparency, accountability, citizen participation and use of new technologies (http://www.opengovpartnership.org/country/el-salvador ).
UN Anticorruption Convention, OECD Convention on Combating Bribery
El Salvador is not a signatory to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. El Salvador is a signatory to the UN Anticorruption Convention and the Organization of American States’ Inter-American Convention against Corruption.
Resources to Report Corruption
Contact at government agency or agencies are responsible for combating corruption:
Doctor Jose Nestor Castaneda Soto, President of the Court of Government Ethics
Court of Government Ethics (Tribunal de Etica Gubernamental)
87 Avenida Sur, No.7, Colonia Escalon, San Salvador
(503) 2565-9403
Email: n.castaneda@teg.gob.sv
http://www.teg.gob.sv/
Licenciado Raúl Ernesto Melara Morán
Fiscalia General de La Republica (Attorney General’s Office)
Edificio Farmavida, Calle Cortez Blanco
Boulevard y Colonia Santa Elena
(503) 2593-7400
(503) 2593-7172
Email: xvpocasangre@fgr.gob.sv
http://www.fiscalia.gob.sv/
Chief Justice Oscar Armando Pineda Navas
Avenida Juan Pablo II y 17 Avenida Norte
Centro de Gobierno
(503) 2271-8743
Email: conchita.presidenciacsj@gmail.com
http://www.csj.gob.sv
Contact at “watchdog” organization (international, regional, local or nongovernmental organization operating in the country/economy that monitors corruption, such as Transparency International):
Roberto Rubio-Fabián
Executive Director, National Development Foundation (Fundacion Nacional para el Desarrollo – FUNDE)
Fundacion Nacional para el Desarrollo, Calle Arturo Ambrogi #411, entre 103 y 105 Avenida Norte, Colonia Escalon, San Salvador
(503) 2209-5300
Email: direccion@funde.org
Resources to request government information
Access to Public Information Institute (IAIP for its initials in Spanish)
Rene Eduardo Carcamo
Commissioner President of the IAIP
Prolongacion Ave. Alberto Masferrer y Calle al Volcán, Edif. Oca Chang # 88
(503) 2205-3800
Email: rcarcamo@iaip.gob.sv
https://www.iaip.gob.sv/
10. Political and Security Environment
El Salvador’s 12-year civil war ended in 1992. Since then, there has been no political violence aimed at foreign investors.
The crime threat level in El Salvador is critical and the Travel Advisory warns U.S. citizens of the high rates of crime and violence. A majority of serious crimes in El Salvador are never solved. El Salvador lacks sufficient resources to properly investigate and prosecute cases and to deter crime. For more information, visit: https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages/ElSalvador.html
El Salvador has thousands of known gang members from several gangs including Mara Salvatrucha (MS-13) and 18th Street (M18). Gang members engage in violence or use deadly force if resisted. These “maras” concentrate on extortion, violent street crime, car-jacking, narcotics and arms trafficking, and murder for hire. Extortion is a common crime in El Salvador. U.S. citizens who visit El Salvador for extended periods are at higher risk for extortion demands. Bus companies and distributors often must pay extortion fees to operate within gang territories, and these costs are passed on to paying customers. The World Economic Forum’s 2018 Global Competitiveness Index reported that costs due to organized crime for Salvadoran businesses are the highest among 140 countries. In 2017, the World Bank estimated that companies in El Salvador allocated 3.4 percent of their revenues to security and crime prevention, the highest in Central America.
Guatemala
Executive Summary
Guatemala has the largest economy in Central America, with a USD 78.45 billion gross domestic product (GDP) and an estimated 3.0 percent growth rate in 2018. Remittances, mostly from the United States, increased by 13.4 percent in 2018 and were equivalent to 11.8 percent of GDP. The United States is Guatemala’s most important economic partner. The Government of Guatemala (GoG) continues to make efforts to enhance competitiveness, promote investment opportunities, and work on legislative reforms aimed at supporting economic growth. More than 200 U.S. and other foreign firms have active investments in Guatemala, benefitting from the U.S. Dominican Republic-Central America Free Trade Agreement (CAFTA-DR). Foreign direct investment (FDI) stock was USD 16.36 billion in 2018, a 1.5 percent increase over 2017. Despite this, FDI flows fell 11.8% in 2018. Some of the activities that attracted most of the FDI flows in the last three years were commerce, banking and insurance, manufacturing, telecommunications, and electricity.
Despite steps to improve Guatemala’s investment climate, international companies choosing to invest in Guatemala face significant challenges. Complex and confusing laws and regulations, inconsistent judicial decisions, bureaucratic impediments, and corruption continue to constitute practical barriers to investment. Under CAFTA-DR obligations, the United States has raised concerns with the GoG regarding its enforcement of both its labor and environmental laws.
Since 2006, the UN-sponsored International Commission against Impunity in Guatemala (CICIG) has undertaken numerous high-profile official corruption investigations, leading to significant indictments. In 2015, CICIG uncovered several cases of high-level official corruption. A case revealing a customs corruption scheme led to the resignations of the president and vice president. Since 2016, the public’s perception of the commitments of President Morales and Congress to anti-corruption efforts has eroded following allegations of corruption against Morales and members of his family. President Morales announced he would not renew CICIG’s mandate on August 31, 2018. CICIG’s mandate is set to expire on September 3, 2019.
Table 1: Key Metrics and Rankings
9. Corruption
Bribery is illegal under Guatemala’s Penal Code. However, corruption remains a serious problem that companies may encounter at many levels. Guatemala scored 27 out of 100 points on Transparency International’s 2018 Corruption Perception Index, ranking it 144 out of 180 countries globally, and 29 out of 32 countries in the region. The score dropped one point compared to the score observed in the 2017 report.
Investors find corruption especially pervasive in customs transactions, particularly at ports and borders away from the capital. The Tax and Customs Authority (SAT) launched a customs modernization program in November 2006, which implemented an advanced electronic manifest system and resulted in the removal of many corrupt officials. However, reports of corruption at major customs locations such as ports and border points remain prevalent. Since 2006, the UN-sponsored International Commission against Impunity in Guatemala (CICIG) undertook numerous high-profile official corruption investigations, leading to significant indictments. Notably, CICIG unveiled a customs corruption scheme in 2015 that led to the resignations of the president and vice president.
In February 2018, the Public Ministry brought charges against former president Alvaro Colom and nine former members of his cabinet after a long-running investigation into fraud involving a bus system in Guatemala City known as Transurbano. Prosecutors claimed Colom’s cabinet approved payments of USD 35 million in government funds to a consortium of private bus companies in charge of the Transurbano without proper legal oversight. According to prosecutors, almost one-third of those payments went to equipment that was never used. On March 1, a judge found sufficient evidence to charge the defendants, and authorities placed Colom and the former members of his cabinet under house arrest.
In January 2018, the Public Ministry, accompanied by CICIG personnel, conducted raids as part of an investigation of the Brazilian company Odebrecht, which allegedly paid USD 17.9 million in bribes to local officials. The investigation led to charges against former presidential candidate Manuel Baldizon, who U.S. authorities detained in Florida on an international arrest warrant in September 2018 on separate money laundering and conspiracy charges. Prosecutors accused Baldizon of accepting at least USD 1.3 million in bribes from Odebrecht to help it win public works contracts. Authorities also sought the arrest of former communications minister Alejandro Sinibaldi, who allegedly distributed the bribes and embezzled at least nine million dollars. Sinibaldi remains a fugitive and was implicated in another case of bribery and influence peddling linked to former president Otto Perez Molina’s administration.
Guatemala’s Government Procurement Law requires most government purchases over USD 119,694 to be submitted for public competitive bidding. Since March 2004, GoG entities are required to use Guatecompras, an Internet-based electronic procurement system to track GoG procurement processes. GoG entities must also comply with GoG procurement commitments under CAFTA-DR. In August 2009, the Guatemalan Congress approved reforms to the Government Procurement Law, which simplified bidding procedures; eliminated the fee previously charged to receive bidding documents; and provided an additional opportunity for suppliers to raise objections over the bidding process. Despite these reforms, large government procurements are often subject to appeals and injunctions based on claims of irregularities in the bidding process (e.g., documentation issues and lack of transparency). In November 2015, the Guatemalan Congress approved additional amendments to the Government Procurement Law that improved transparency of procurement processes by barring government contracts for financers of political campaigns and parties, members of Congress, other elected officials, government workers, and their family members. The 2015 reforms expanded the scope of procurement oversight to include public trust funds and all institutions (including NGOs) executing public funds. The U.S. government continues to advocate for the use of open, fair, and transparent tenders in government procurement as well as procedures that comply with CAFTA-DR obligations, which would allow open participation by U.S. companies.
El Salvador, Guatemala, Honduras, and the United States agreed to specific commitments in a joint statement to the support of the Alliance for Prosperity on February 24, 2016. The countries agreed to measures that will ensure more accountable, transparent, and effective public institutions; invest in human capital; provide greater opportunities to all citizens; and guarantee a safe and secure environment for their people, with a particular focus on the underlying conditions driving migration to the United States. The statement follows progress on commitments agreed to by the same countries in March 2015.
Guatemala ratified the U.N. Convention against Corruption in November 2006, and the Inter-American Convention against Corruption in July 2001. Guatemala is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. In October 2012, the Guatemalan Congress approved an anti-corruption law that increases penalties for existing crimes and adds new crimes such as illicit enrichment, trafficking in influence, and illegal charging of commissions.
Resources to Report Corruption
Contact at government agencies responsible for combating corruption:
Public Ministry
23 Calle 0-22 Zona 1, Ciudad de Guatemala
Phone: (502) 2251-4105; (502) 2251-4219; (502) 2251-5327; (502) 2251-8480; (502) 2251-9225
Email: fiscaliacontracorrupcion@mp.gob.gt
Comptroller General’s Office
7a Avenida 7-32 Zona 13
Phone: (502) 2417-8700
Contact at “watchdog” organization:
Name: Accion Ciudadana (Guatemalan Chapter of Transparency International)
Address: Avenida Reforma 12-01 Zona 10, Edificio Reforma Montufar, Nivel 17, Oficina 1701
Phone: (502) 2388- 3400
Toll free to submit corruption complaints: 1-801-8111-011
Email: alac@accionciudadana.org.gt or accionciudadana@accionciudadana.org
10. Political and Security Environment
Guatemala has one of the highest violent crime rates in Latin America. According to the National Civil Police (PNC), the murder rate in 2018 was 22.4 per 100,000, making Guatemala one of the most dangerous countries in the world. Rule of law is lacking and the judicial system is weak, overworked, and inefficient. The police are understaffed and sometimes corrupt.
Given the weak rule of law, violent crime such as armed robbery and murder, is common. Gang activity, such as extortion, violent street crime, and narcotics trafficking, is widespread. Local police may lack the resources to respond effectively to serious criminal incidents. Although security remains a widespread concern, foreigners are not usually singled out as targets of crime. Recent examples of violence include extrajudicial killings, illegal detentions, and property damage as a result of protests against some investment projects.
The main source of tension among indigenous communities, Guatemalan authorities, and private companies is the lack of prior consultation and alleged environmental damage. The UN’s Office of the High Commissioner for Human Rights (OHCHR) reported an increase in conflicts over the exploitation of natural resources in indigenous areas between 2012 and 2014. In more than a dozen incidents between 2012 and 2014, the government’s response was the declaration of a state of emergency, limiting certain constitutional rights in the conflicted areas.
Damage to projects or installations is rare. However, there was an instance in October 2018 in which unidentified arsonists burned machinery and other equipment at the site of a hydroelectric construction project near the northern border with Mexico.
Honduras
Executive Summary
The United States is Honduras’ most important economic partner. While the Honduran government places a priority on improving the investment climate as a means of attracting investment and promoting economic growth, meaningful reform has been slow. As of April 2019, the Honduran Congress is debating plans to merge the three institutions charged with attracting increased foreign direct investment: the National Investment Committee, ProHonduras, and President Hernandez’s signature Honduras 20/20, an ambitious initiative to create 600,000 new jobs by 2020. Economic reforms and continued commitment to fiscal stability in Honduras have led to a stabilized macroeconomic environment and positive outlooks and debt upgrades from major international ratings agencies. Some foreign companies with investments in Honduras, however, continue to face challenges. Inconsistent and expensive energy, corruption, weak institutions, high levels of crime, low education levels, and poor infrastructure hamper Honduras’ investment climate. While the political climate has stabilized since the weeks of protests that followed the November 2017 presidential election, continued low-level protests and uncertainty also pose a challenge to the investment climate.
The Honduran government implemented several measures to improve investment and trade facilitation. In November 2016, the Government of Honduras launched the Presidential Commission for Integral Reform of the Customs System to simplify import/export procedures and improve relevant efficiency aspects of Honduran customs services. In July 2016, Honduras formally ratified the WTO Trade Facilitation Agreement, which contains provisions for expediting the movement, release, and clearance of goods, and sets out measures for effective cooperation for customs compliance and trade facilitation issues. In June 2017, Honduras and Guatemala initiated a Customs Union to foster and increase efficient cross-border trade. El Salvador subsequently approved joining the Customs Union in July 2018. In July 2017, the Government of Honduras shifted management of product registration from the Ministry of Health to a new, more efficient Sanitary Regulatory Agency, leading to a decrease in the backlog of 13,000 sanitary registrations. Finally, in February 2019, the Government of Honduras established the National Trade Committee, chaired by the Minister of Economic Development.
Many of the approximately 200 U.S. companies that operate in Honduras take advantage of protections available in the Central American and Dominican Republic Free Trade Agreement (CAFTA-DR). Honduras’ participation in CAFTA-DR has enhanced U.S. export opportunities and diversified the composition of bilateral trade. Substantial intra-industry trade now occurs in textiles and electrical machinery, alongside continued trade in traditional Honduran exports such as coffee and bananas. In addition to liberalizing trade in goods and services, CAFTA-DR includes important disciplines relating to investment, customs administration and trade facilitation, technical barriers to trade, government procurement, telecommunications, electronic commerce, intellectual property rights, transparency, and labor and environmental protection.
Table 1: Key Metrics and Rankings
9. Corruption
Following anticorruption protests in 2015, President Hernandez signed an agreement with the Organization of American States to form the Mission Against Corruption and Impunity in Honduras (MACCIH). MACCIH has four principle objectives:
- Prevent and combat corruption and impunity
- Criminal justice system reform
- Political and electoral reform
- Public security
Since its inception in April 2016, MACCIH has worked with the Public Ministry to achieve success on several significant cases, including against current and former public officials. MACCIH advanced justice reform by lobbying the Honduran Congress to pass a Law on Financing, Transparency, and Oversight of Political Parties in Honduras. They also presented draft legislation for a Law of Effective Collaboration (similar to plea-bargaining) to the Honduran authorities. MACCIH worked with the Public Ministry to create a special anti-corruption unit (UFECIC) to pursue large-scale corruption cases. MACCIH established a Civil Society Observatory to monitor the criminal justice system in the country and work with civil society to implement a cohesive strategy to address systemic corruption. MACCIH faces the end of its mandate in January 2020 without agreement for an extension between the OAS and the Honduran government.
U.S. businesses and citizens report corruption in the public sector and the judiciary is a significant constraint to investment in Honduras. Historically, corruption has been pervasive in government procurement, issuance of government permits, customs, real estate transactions (particularly land title transfers), performance requirements, and the regulatory system. Since 2012, the Honduran government signed agreements with Transparency International, the Construction Sector Transparency Initiative, and the Extractive Industry Transparency Initiative. Honduras is also receiving support from the Millennium Challenge Corporation in the development of an e-procurement platform and public procurement auditing.
Honduras’s Rankings on Key Corruption Indicators
| Measure |
Year |
Index/Ranking |
| TI Corruption Index |
2018 |
29.0/100, 132 of 180 |
| World Bank Doing Business |
May 2018 |
121/190 |
| MCC Government Effectiveness |
FY 2018 |
-0.30 (13 percent) |
| MCC Rule of Law |
FY 2018 |
-0.73 (10 percent) |
| MCC Control of Corruption |
FY 2018 |
-0.16 (37 percent) |
The United States Foreign Corrupt Practices Act (FCPA) deems it unlawful for a U.S. person, and certain foreign issuers of securities to make corrupt payments to foreign public officials for the purpose of obtaining or retaining business for directing business to any person. The FCPA also applies to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States. For more information, see the FCPA Lay-Person’s Guide: http://www.justice.gov/criminal/fraud/ .
Honduras is a member of the UN Anticorruption Convention, which entered into force on December 14, 2005. The UN Convention is the first global comprehensive international anticorruption agreement and requires countries to establish criminal penalties for a wide range of acts of corruption. The UN Convention covers a broad range of issues from basic forms of corruption such as bribery and solicitation, embezzlement, trading in influence to the concealment and laundering of the proceeds of corruption. The UN Convention contains transnational business bribery provisions that are functionally similar to those in the Organization for Economic Cooperation and Development Anti-Bribery Convention.
Honduras is a member of the Inter-American Convention against Corruption (OAS Convention), which entered into force in March 1997. The OAS Convention establishes a set of preventive measures against corruption; provides for the criminalization of certain acts of corruption, including transnational bribery and illicit enrichment; and contains a series of provisions to strengthen the cooperation between its states parties in areas such as mutual legal assistance and technical cooperation.
Resources to Report Corruption
Companies that face corruption-related challenges in Honduras may contact the following organizations to request assistance.
Public Ministry
Eva Naza
Coordinator for External Cooperation
Email: cooperacionexterna.mp@gmail.com
The Public Ministry is the Honduran government agency responsible for criminal prosecutions, including corruption cases.
Association for a More Just Society (ASJ)
Yahayra Yohana Velasquez Duce
Director of Transparency
Residencial El Trapiche, 2da etapa Bloque B, Casa #25
Telephone: +504-2235-2291
Email: info@asjhonduras.com
ASJ is a nongovernmental Honduran organization that works to reduce corruption and increase transparency. It is an affiliate of Transparency International.
National Anti-Corruption Council (CNA)
Alejandra Ferrera
Executive Board Assistant
Colonia San Carlos, calle Republica de Mexico
Telephone: 504-2221-1181
Email: aferrera@cna.hn
CAN is a Honduran civil society organization comprised of Honduran business groups, labor groups, religious organizations, and human rights groups.
U.S. Embassy Tegucigalpa, Honduras
Attention: Economic Section
Avenida La Paz
Tegucigalpa M.D.C., Honduras
Telephone Numbers: (504) 2236-9320, 2238-5114
Fax Number: (504) 2236-9037
Companies can also report corruption through the Department of Commerce Trade Compliance Center Report a Trade Barrier website: http://tcc.export.gov/Report_a_Barrier/index.asp .
10. Political and Security Environment
Despite recent progress on improving security in Honduras, crime and violence rates remain high and add cost and constraint to investments. While the political climate has stabilized since the weeks of protests that followed the November 2017 presidential election, continued low-level protests and uncertainty pose a challenge to ongoing stability.
U.S. citizens should be aware that large public gatherings might become unruly or violent quickly. For more information, consult the Department of State’s latest travel warning: https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories/honduras-travel-advisory.html.
Panama
Executive Summary
As the home of the Panama Canal, the world’s second largest free trade zone, and sophisticated logistics and finance operations, Panama attracts high levels of foreign direct investment from around the world and has great potential as a foreign direct investment (FDI) magnet and regional hub for a number of sectors. Panama remains in the first position in attracting FDI in Central America, closing 2018 with USD 5,548.5 million, indicated by the latest report of Panama’s National Institute of Statistics and Census (INEC). The accumulated foreign investment of the United States in Panama represents 22.2 percent of the total at USD 1.21 billion. Panama boasts one of the Western Hemisphere’s fastest growing economies, good credit, a strategic location, and a stable, democratically elected government.
Panama’s Ministry of Economy and Finance predicts the economy will grow by 4.5 percent in 2019, up from 3.7 percent in 2018. Panama’s inflation rate was less than one percent as of the end of 2018. Panama’s sovereign debt rating is investment grade, with ratings of Baa1 (Moody’s), and BBB (Fitch; Standard & Poor’s). The Panama Canal Authority inaugurated a USD 5.4 billion expansion of the Panama Canal in June 2016. The expansion has promoted increased investment in port systems operations, storage facilities, and logistics. Panamanian President, Juan Carlos Varela, has sought to improve Panama’s image and investment climate profile. Panama retains one of the highest ratio of FDI to gross domestic product (GDP) in the region at 7.7 percent.
Panama has challenges, including corruption, judicial capacity, a poorly educated workforce, and labor and banking issues, which have either precluded further investment from foreign companies or have complicated existing investments. With a population of just over four million, Panama’s small market size for many companies is not worth the risk of investment. The World Bank classified Panama in July 2018 for the first time as a “high-income” jurisdiction in its annual country classifications after its Gross National Income per capita barely squeaked past the threshold for that classification. Panama has the 12th highest Gini Coefficient in the world and a national poverty rate of 19 percent. This contrast is just one indicator of a growing disparity between the economic narrative and the reality of Panama’s working and middle classes.
Table 1: Key Metrics and Rankings
9. Corruption
Corruption is Panama’s biggest challenge, and Moody’s identified it as one of the risk factors that could affect Panama’s sovereign rating in the medium-term. Panama ranked 93rd out of 180 countries in the 2018 Transparency International Corruption Perceptions Index. U.S. investors allege corruption is rampant in the private sector and all levels of the Panamanian government; purchase managers and import/export businesses have been known to overbill or take percentages off purchase orders while judges, mayors, members of the National Assembly, and local representatives have reportedly accepted payments for facilitating land titling and court rulings. The Foreign Corrupt Practice Act (FCPA) precludes U.S. companies from engaging in bribery and other activities, and U.S. companies look carefully at levels of corruption before investing or bidding on government contracts.
The process to apply for permits and titles can be opaque, and civil servants have been known to ask for payments at each step of the approval process. The land titling process in particular has been very troublesome for multiple U.S. companies, which have waited in some cases decades for cases to be resolved.
Panama’s government lacks strong systemic checks and balances that would serve to incentivize accountability. Under Panamanian law, only the National Assembly may initiate corruption investigations against Supreme Court judges, and only the Supreme Court may initiate investigations against members of the National Assembly, which in turn has led to charges of a de facto “non-aggression pact” between the branches.
In late 2016, Odebrecht, a Brazilian firm, admitted to paying USD 59 million in bribes to win Panamanian contracts of at least USD 175 million between 2010 and 2014. Odebrecht’s admission was confined to bribes paid during the previous administration. The scandal’s reach has yet to be fully determined and Odebrecht’s activities building the second metro line and the Tocumen airport expansion have continued.
Anti-corruption mechanisms exist, such as asset forfeiture, whistleblower and witness protection, and conflict-of-interest rules. However, the general perception is that anti-corruption laws are not applied rigorously, that government enforcement bodies and the courts are not effective in pursuing and prosecuting those accused of corruption, and the lack of a strong professionalized career civil service in Panama’s public sector has hindered systemic change. The fight against corruption is also hampered by the government’s refusal to dismantle Panama’s dictatorship-era libel and contempt laws, which can be used to punish whistleblowers, while those accused of acts of corruption are seldom prosecuted and almost never jailed.
U.S. investors in Panama complain about a lack of transparency in government procurement. The parameters of government tenders often change during the bidding process, creating confusion and the perception the government tailor-makes tenders for specific companies. For example, the Panama NG Power project has been stalled due to legal challenges alleging the government created the terms of the tender specifically for the Chinese-led consortium. Odebrecht, furthermore, admitted to paying USD 59 million in bribes to win government contracts, but is still doing business in Panama and actively applying for government projects.
Panama ratified the United Nations’ Anti-Corruption Convention in 2005 and the Organization of American States’ Inter-American Convention Against Corruption in 1998. However, there is a perception that Panama should more effectively implement the conventions
Resources to Report Corruption
Angelica Maytin
Directora Nacional de Transparencia y Acceso a la Informacion (ANTAI)
Autoridad Nacional de Transparencia y Acceso a la Informacion
Ave. del Prado, Edificio 713, Balboa, Ancon, Panama, República de Panama
(507) 527-9270 / 71/72/73/74
www.antai.gob.pa
10. Political and Security Environment
Panama is a peaceful and stable democracy. On rare occasions, large-scale protests can turn violent and disrupt commercial activity in affected areas. Mining and energy projects have been sensitive, especially those that involve development in the designated indigenous areas called comarcas.
In May 2014, Panama held national elections that international observers agreed were free and fair. The transition to the new government was smooth and uneventful. Panama’s Constitution provides for the right of peaceful assembly, and the government respects this right. No authorization is needed for outdoor assembly, although prior notification for administrative purposes is required. Unions, student groups, employee associations, elected officials, and unaffiliated groups frequently attempt to impede traffic and commerce in order to force the government or business to agree to demands. Elections are held every five years and the next nationwide elections, as of this writing, are scheduled for May 2019.
