Argument

An expert's point of view on a current event.

Want to Counter Authoritarianism in Central America? Follow the Money.

The United States lacks reliable partners in the region. Here’s how to hold them accountable.

By , an assistant professor of communications at California State University, Fullerton, and , an assistant professor of political science at Virginia Commonwealth University.
Protesters in Honduras hold banners.
Protesters display a huge banner reading “Where is the Money?” amid accusations of government corruption regarding seven field hospitals bought from Turkey, in Tegucigalpa, Honduras, on Aug. 26, 2020. ORLANDO SIERRA/AFP via Getty Images

During her recent visit to Guatemala, U.S. Vice President Kamala Harris warned migrants “do not come”—a message destined to be futile. Many drivers of migration are out of U.S. hands: climate change, food insecurity, crime, and corruption. And although Harris and U.S. President Joe Biden announced they will concentrate their efforts on addressing these root causes, prior efforts to do so—especially those targeting corruption—have been thwarted by governments in the region, which view such efforts as an existential threat.

During the same visit, Harris also announced a new U.S. Justice Department (DOJ) anti-corruption task force for the Northern Triangle, which consists of El Salvador, Guatemala, and Honduras. But over the last several years, their leaders have been busy dismantling any institutions that may provide transparency or checks on presidential power, including all three countries’ anti-corruption commissions: the International Commission against Impunity in Guatemala (CICIG), the Mission to Support the Fight against Corruption and Impunity in Honduras, and, earlier this month, the International Commission against Impunity in El Salvador (CICIES). The day after Harris’s announcement, Salvadoran President Nayib Bukele announced he would make Bitcoin a legal tender, raising alarms from the United States and International Monetary Fund (IMF) about possible facilitation of money laundering and tax evasion.

During her recent visit to Guatemala, U.S. Vice President Kamala Harris warned migrants “do not come”—a message destined to be futile. Many drivers of migration are out of U.S. hands: climate change, food insecurity, crime, and corruption. And although Harris and U.S. President Joe Biden announced they will concentrate their efforts on addressing these root causes, prior efforts to do so—especially those targeting corruption—have been thwarted by governments in the region, which view such efforts as an existential threat.

During the same visit, Harris also announced a new U.S. Justice Department (DOJ) anti-corruption task force for the Northern Triangle, which consists of El Salvador, Guatemala, and Honduras. But over the last several years, their leaders have been busy dismantling any institutions that may provide transparency or checks on presidential power, including all three countries’ anti-corruption commissions: the International Commission against Impunity in Guatemala (CICIG), the Mission to Support the Fight against Corruption and Impunity in Honduras, and, earlier this month, the International Commission against Impunity in El Salvador (CICIES). The day after Harris’s announcement, Salvadoran President Nayib Bukele announced he would make Bitcoin a legal tender, raising alarms from the United States and International Monetary Fund (IMF) about possible facilitation of money laundering and tax evasion.

Any successful approach toward the Northern Triangle needs to acknowledge two converging phenomena: The United States is less hegemonic than it once was, and the region is becoming increasingly autocratic. Presidents are consolidating power in partnership with elite criminal networks to wall themselves off from public accountability and outside pressure.

Yet as these governments are becoming more repressive and corrupt, their Achilles’ heel—dependence on global money—remains from foreign governments, international financial institutions, banks, investors, and their own citizens living abroad. And as corruption is largely financial in nature, countering it requires involving these actors; Washington cannot go it alone, and Biden’s approach must be both bold and realistic about the leverage and limits the United States has in the region. To this end, he should focus on four areas: criminal investigations, targeted sanctions, loan oversight, and accountability in trade agreements.

Biden’s approach must be both bold and realistic about the leverage and limits the United States has in the region.

Prosecutors in the United States have already pursued criminal investigations of various government and government-linked figures in the region. In 2019, Honduran President Juan Orlando Hernández was referred to as a co-conspirator in a drug trafficking case by the United States Attorney’s Office for the Southern District of New York. This year, a court in the Southern District convicted his brother, Tony Hernández, a former congressman whose initials were stamped on packages of cocaine he was smuggling. He was accused of using proceeds from drug trafficking to finance his brother’s presidential campaign.

Elsewhere, similar patterns have emerged. Bukele is surrounded by numerous officials and individuals with alleged ties to Alba Petroleos, a partnership that effectively serves to launder money for PDVSA, Venezuela’s state oil company, which is under international sanctions, and the Texis Cartel, another money laundering ring. In Guatemala, multiple officials have been named in customs fraud and graft conspiracies, including former Guatemalan President Otto Pérez Molina. Government officials in these countries who have sought to investigate these ties, including the former Salvadoran attorney general, have been fired and replaced with more sympathetic individuals. Journalists who have sought transparency have been met with intimidation and harassment. This year, Guatemala’s congress refused to seat a noted anti-graft judge on the Constitutional Court. These crackdowns are often met with public rebukes from U.S. officials but not much else.

But money laundering and other financial crimes go beyond borders, and prosecutors in the United States and other countries are not subject to the same pressures as diplomats. As the DOJ case against Hernandez shows, criminal investigations can hold such officials accountable. Migrants often name their own governments as motivations for leaving; demonstrating that no one is above the law deters future malfeasance and ultimately builds public trust in institutions.

Multilateral bodies can play a key role here as well. The Organization of American States, which had partnered with El Salvador to create CICIES before it was shut down, could release information from the corruption probes the government has suppressed, which human rights groups called for it to do. International and nongovernmental organizations can continue investigations blocked by governments and provide transparency directly to the people.

The Biden administration can also send a clear deterrent message with targeted sanctions. The government has already taken steps to name officials with known criminal connections. One U.S. State Department list names, among others, Bukele’s chief of cabinet and former Guatemala presidential chief of staff Gustavo Adolfo Alejos. However, this name-and-shame strategy requires officials who care about shame. It also needs to come with direct consequences. Broad sanctions are a blunt tool, often harmful to regular citizens and ineffective against government officials, as the Trump administration’s “maximum pressure” policies toward Venezuela and Iran demonstrated. Yet there are more targeted sanctions that can be aimed at government officials, notably the U.S. Treasury Department’s Global Magnitsky Act sanctions, which freeze their accounts and bar companies from conducting business with them. These have been applied to Saudi officials connected to the brutal murder of journalist Jamal Khashoggi. As a result of applying the Magnitsky Act, Treasury’s Financial Crimes Enforcement Network can also investigate laundering through U.S. banks and seize assets held in the United States by corrupt officials. The United States can also bar corrupt officials from obtaining visas. Visa sanctions may not appear to be a harsh punishment, but such tools become more effective when coordinated with other countries officials may need to visit.

As other countries are well aware, the United States wields considerable influence over international lending institutions such as the IMF, World Bank, and Inter-American Development Bank. These institutions can continue to require enforceable standards for financial transparency and strict audits as conditions for loans to countries in the region, in partnership with the United States and other lenders.

Bukele’s Bitcoin announcement in particular highlights the desire of some governments to insulate themselves from the scrutiny of these organizations. Yet El Salvador’s designation of Bitcoin as a currency imperils its access to loans, a dangerous prospect for a country whose external debt is approaching 100 percent of its GDP. Cryptocurrency can facilitate money laundering and sanctions evasion as peer-to-peer transfers are not monitored by Swift, the global banking messaging system—a concern already raised by U.S. Treasury Secretary Janet Yellen. Stalled negotiations with the IMF over a $1 billion loan likely reflect concerns from the fund over El Salvador’s future ability to counter tax evasion and the possibility of payment balance problems under a Bitcoin dual-currency system. To prevent money laundering, the United States and international financial institutions should refrain from accepting money originated in Bitcoin transactions as payment for international obligations of the Salvadoran government and consider risk of default by any government betting its revenues on future cryptocurrency value.

Procurement fraud is another common form of corruption. Here, too, lending institutions can play a role in stopping graft. Prior to its shutdown, El Salvador’s anti-corruption body had been investigating misuse of funds by the Health Ministry in purchases of personal protective equipment and pandemic supplies following an emergency COVID-19 response loan by the IMF. Lending institutions must maintain strict oversight and heavy consequences for tax evasion and fraud, which put direct pressure on governments dependent on loans to paper over their budget shortfalls.

The Biden administration can also immediately take action on corruption and anti-democratic measures through its strategic approach to trade in the region.

The Biden administration can also immediately take action on corruption and anti-democratic measures through its strategic approach to trade in the region. Unlike other parts of Latin America where the United States has been retreating, in Central America, the United States remains the largest trade partner. A large amount of commercial activity, including $10 billion in exports from the region to the United States, is facilitated by the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR). Reviewing the terms of trade agreements in light of corruption and democratic backsliding could have major political impacts in the region.

There is precedent for this: In Nicaragua, the United States has already responded to the Ortega government’s persecution of political opponents and election rigging by threatening to review the country’s participation in CAFTA-DR. Trade agreements include provisions for labor rights and support for civil society organizations, some of which are under threat by those governments. However poorly enforced these conditions have been in the past, it is no excuse for letting them slide in the future lest repression be rewarded with trade privileges. Reviewing existing trade agreements is an immediate step toward accountability the administration can take.

Trade deals need to hold U.S. companies accountable as well by requiring transparency standards within global supply chains and making sure businesses do not benefit from tax evasion, bribery, or customs fraud. Enforcing high standards for rule of law is good for business: Investors and trade partners seek predictability and cannot be expected to bet on countries where the rules are subject to the whims of individual leaders. A review of CAFTA-DR could both address corruption and authoritarianism and boost economic health in the region in the long run.

The root causes of migration from the region stem in no small part from the United States’ own history there, which often bolstered authoritarian regimes and helped set the foundation for those in power today. For reasons pertaining to history, cultural and diaspora ties, and economics, the United States retains tremendous influence in the region. Should it seek to repay its debt to the people of the region, holding the officials who steal from them accountable—and focusing on policies that make life in the region more just for ordinary citizens—would be a good start.

Ricardo J. Valencia is an assistant professor of communications at California State University, Fullerton. Twitter: @ricardovalp

Michael Paarlberg is an assistant professor of political science at Virginia Commonwealth University. Twitter: @MPaarlberg

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