THIRD ANNUAL CORRUPTION REPORT - GUATEMALA

UNCLAS SECTION 01 OF 02 GUATEMALA 000139

SIPDIS

DEPARTMENT FOR INL/C: RIGGS AND WERKSMAN, WHA/PPC: HAMANN,
AND WHA/USOAS: STICKLES.

E.O. 12958: N/A
TAGS: KCOR KCRM SNAR PREL PGOV GT
SUBJECT: THIRD ANNUAL CORRUPTION REPORT - GUATEMALA

REF: 02 STATE 239506


1. Summary: Guatemala made limited progress in 2002 in
implementing its commitments under the Inter-American
Convention Against Corruption. The primary obstacle to
greater progress was the lack of effective leadership on the
part of the Executive in fighting corruption, and the
political polarization that heightened confrontation between
the GOG and its growing number of critics. Transparency
International rated Guatemala near the bottom (81st out of
102 countries) of its annual review of public perceptions of
corruption. On October 10, 2002, then-WHA Assistant
Secretary Otto Reich testified to the U.S. Congress that

SIPDIS
corruption has increased under the Portillo Administration
and had become the primary impediment to the strengthening of
democracy in Guatemala. Guatemala's cooperation in the war
on drugs also fell to historically low levels in 2002, in
large part due to pervasive corruption. End Summary.

Accomplishments by the Government of Guatemala
-------------- -

2. There were a limited number of successes in the GOG's
efforts to control corruption in 2002. Congress passed two
important pieces of legislation which make it easier to
prosecute government officials for corruption. Both laws
will come into force in early 2003. Several other
transparency measures were proposed in Congress, including
whistle-blower protections and a mechanism for the
participation of civil society auditing government
expenditures, but Congress had not passed these bills by the
end of the year. One of the most concrete accomplishments in
2002 was the implementation of currency declaration forms at
the International Airport. This initiative, which was
intended to help implement new money laundering legislation,
made it possible for the GOG to prosecute individuals who
attempt to bring into the country or out of it more that
10,000 USD without declaring the funds to customs officials.
While there have been no convictions yet, numerous arrests
have been made and several cases are going forward to
prosecution. The measure creates a significant disincentive
for money laundering.


3. A further potential accomplishment was the announcement by
the Attorney General's Office that investigations had been
opened into the activities of five former military officers
who are believed to be involved in organized crime -- all of
the individuals are believed to have ties to senior GOG
officials. The GOG also announced in 2002 the establishment
of an ambitious National Anti-Corruption Plan which it
drafted in coordination with World Bank experts. This
project has not yet advanced significantly. Another
accomplishment was the disbanding of the special
counter-narcotics police (the DOAN) in the wake of
extra-judicial killings and mounting evidence that the DOAN
was engaged in selling seized drugs. One of the most
promising recent accomplishments was the GOG's naming of a
blue-ribbon Transparency Commission composed of several
respected members of civil society. GOG efforts to
manipulate the commission, however, have led to threats by
several members to resign and have brought into question the
efficacy of the commission.

Accomplishments of Civil Society
--------------


4. Civil society was an active player in the anti-corruption
debate in Guatemala in 2002. Some civil society actors were
motivated by their focus on strengthening the democratic
institutions and processes of the state, and others by a more
partisan interest in discrediting a government whose levels
of corruption have been higher than Guatemalans are used to.
The primary accomplishment of civil society groups in
anti-corruption efforts in 2002 has been to keep the issue of
government corruption in public view, primarily through use
of the news media. This initiative has helped overcome
traditionally high levels of apathy on the part of the
general population. Press coverage of corruption scandals
was relentless. In February, the "Foro Guatemala," a civil
society organization encompassing representatives of most
organized sectors of Guatemalan society, held a major
conference on the effects of corruption. The results of
several studies were compiled and released with great
fanfare. The theme of the conference has not had the
expected resonance among the population, however, and shortly
after the conference a national opinion poll found that only
41% of Guatemalans agreed that acts of corruption should be
denounced when detected. A banking scandal involving shell
corporations in Panama established in the names of the
President and Vice President, among others, resulted in the
formation of a loose coalition of small political parties and
civil society leaders known as the Civic Movement Aganist
Corruption ("Moviemento Civico Contra la Corrupcion"). The
movement did not take root, however, when they failed to
mobilize significant participation in anti-corruption
protests on the Presidential Palace to demand the resignation
of the President and Vice President.
Hamilton