Comparing Presidential Corruption Scandals in Guatemala and Brazil: Part 2

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On October 27, InSight Crime published an analysis comparing recent corruption scandals involving former presidents in Guatemala and Brazil. In addition to reporting by InSight Crime and other outlets, the article also drew on a discussion InSight Crime moderated recently between Mike Allison and Matthew Taylor. An edited transcript of that conversation appears below.

Allison is an expert on Central American politics who serves as an associate professor and chair of the political science department at the University of Scranton. Taylor is an associate professor at American University's School of International Service who focuses on state capacity and corruption in Latin America and who has extensive experience in Brazil.

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IC: Can you lay out in broad strokes the way these corrupt structures operated in each country, and who some of the major players are?

MA: In Guatemala during the 1970s and 1980s, there was a coming together of the criminal state and the counter-insurgent state that perpetuated itself beyond the civil war years, all the way up until today. You had individuals in the military and the government who were both involved in serving in government, but at the same time pursuing interests related to criminal activities. And for about the last ten years, the international community, through the International Commission against Impunity in Guatemala (CICIG), has been trying to work with Guatemalan partners to dismantle the illicit security structures that have been in effect for 30 or 40 years.

It really hit the international airwaves back in 2015, when the CICIG and public prosecutors uncovered a ring whereby importers were paying bribes to lower the taxes on goods they were importing and exporting. Over time, they followed the network to individuals within the government, labor unions working at the port and private businessmen, which eventually led all the way up to the vice president of the country, Roxana Baldetti, and the president, Otto Pérez Molina, leading to their resignations last year. And ever since that first case came about -- which was called "The Line" (La Linea) or the customs scandal -- it feels like every few months the CICIG and the prosecutor's office uncover a new scandal associated with Pérez Molina, Baldetti and other members of the Patriotic Party (Partido Patriota).

One scandal involved a contract that was awarded for the port of Quetzal. Another case is known as the "Cooptation of the State," which was related to campaign finance. A lot of illicit money was contributed to the Patriotic Party's campaign back in 2007 and 2008, which they then made good on to the people that had made donations when they came into government. And the other big one was the "Kick-in Campaign," where other members of the Patriotic Party were giving gifts in deference to the president and vice president. Those are the four main ones associated with the last government, but every time they pursue a line of investigation, we seem to learn about other corrupt dealings that the Patriotic Party and former President Pérez Molina were engaged in.

IC: The case in Guatemala that seems to have the most similarity with what is going on in Brazil is the "Cooptation of the State," where illicit campaign contributions were provided in exchange for benefits derived from public funds. Does that seem accurate to you, Professor Taylor?

MT: I was thinking exactly the same thing. I think the intersection in Brazil that's been at the heart of the scandal involving the state oil company Petrobras and the "Mensalão" vote-buying scandal before it in 2005, is the intersection between campaign finance and appointments in the system of coalitional formation. And more generally, this occurs within the context of weak accountability. But similarly to Guatemala, once there was the beginning of some kind of accountability, as they've pulled on that thread, the string keeps coming. In other words, they just keep finding more and more and more. And I think this helps explain the degree to which this is a scandal that has become much bigger than anything we've seen before. Partly, the impunity that existed in the past enabled corruption to occur on a scale that was in many ways unimaginable. But also the new enforcement technologies and the new ability to enforce the law has meant that those corrupt patterns that would have previously been hidden have come to light in a way that is really unprecedented.

IC: The two main similarities between these cases seem to be the players who were involved and the structure of these corruption schemes, as well as the public response to each. In Guatemala, there were huge protests related to revelations about these corruption schemes, and similarly in Brazil. Can you comment on the public response to these revelations in each country?


 "I think you can really draw a causal arrow from the protests in Guatemala to the way that things unfolded there. In Brazil, public revulsion with the way the government was working has been widespread and has been very important to determining the political context for much of the past few years. But the protests themselves began in July 2013, and they originally started around the issue of public services."


MA: Beginning in early 2015, there was an unprecedented mobilization of Guatemalan citizens, particularly in urban areas, to voice their outrage about the corruption that was alleged to have occurred under the Pérez Molina administration. Protests like that hadn't been seen since the civil war. While there's been a lot of post-war mobilization in the last 20 years, most of it has been in the rural parts of the country. It's been indigenous protests. It's been infrequent. This was really the first time where you had thousands of citizens occupy the park in front of the national palace in Guatemala City for weeks on end. You had people from across the country converging on the capital and carrying out smaller scale protests regionally. So it really was that the investigation that was taking place by the attorney general and the CICIG was given greater support and protection by having thousands of Guatemalans from across the political spectrum, from across the socioeconomic sphere, out in the park demonstrating their support and their outrage toward the sitting government at the time.

IC: This also has a sort of parallel within a parallel to Brazil, which is that the protests and the prosecution of Pérez Molina eventually led to his resignation, which in some ways is analogous to what happened in Brazil. Do you see that parallel as well, Professor Taylor?

MT: Maybe the parallel breaks down a little bit. And I'd say a couple things first about the public response in Brazil, that's a little bit different from the response in Guatemala. From what Professor Allison said, I think you can really draw a causal arrow from the protests in Guatemala to the way that things unfolded there. In Brazil, public revulsion with the way the government was working has been widespread and has been very important to determining the political context for much of the past few years. But the protests themselves began in July 2013, and they originally started around the issue of public services. You may recall the demand for "FIFA-style" healthcare -- a complaint that Brazilians were paying a lot and getting very little in return.

So, the timing is a little bit different. Before there was really any public knowledge about an investigation of corruption at Petrobras, the demonstrations that happened beginning in July 2013 were complaining about public services. The causal path is not as clear in Brazil as it is in Guatemala. There were already protests happening before the scandals broke. And those were really about access to public services and not really about corruption. Of course, this is the political context within which the Petrobras scandal became much more salient, and so much so that the Petrobras scandal became a major campaign issue by October 2015 when the elections happened.

MA: In Guatemala, you had the concern about public services as well. While you had the customs scandal break in April 2015, which led to the vice president's resignation in May, at the same time there was a scandal that emerged from the social security institute that they had switched venders for the delivery of kidney dialysis in return for kickbacks. Several people died over the ensuing six months because of the treatment that wasn't being delivered. So while you had the "La Linea" scandal, which was about the customs taxes, you had simultaneously at one point people really being able to connect the corruption back to deaths and the dereliction of Guatemala's public hospitals.

So, there was the corruption scandal at the ports, but then there was also the dialysis issue, where people were dying. At the same time, more and more stories came out about the United States providing Guatemala with assistance for security, to help support and transform the police and the military. And Guatemala was saying, "we don't have any money." Individual police officers in barracks have to provide for their own uniforms, their own food, their own services. And then you started to see the head of public security in country implicated in kickback schemes and corruption, and the state pilfering money through customs and the kidney dialysis. People were starting to look around and say that there are real consequences from corruption. People were dying for lack of dialysis treatment, and the police didn't have uniforms and weapons and enough ammunition. And what helped was to have some concrete examples that the people of Guatemala could latch on to, rather than just a somewhat complicated scandal at the ports.

MT: I think there was something similar going on in Brazil at the time. I like the way Professor Allison phrased that. Essentially you had kind of vague public disenchantment, but there was nothing to latch on to. Initially, the public was latched on to the World Cup, which they saw as a waste of money, or money that could have been better spent elsewhere. But the corruption scandal really provided a focal point for public dissatisfaction -- which is dissatisfaction not solely with corruption, but also with the economic downturn, lack of social services and all the rest. But the corruption scandal became a major focal point around which political actors began to concentrate.

MA: Right. Every Guatemalan could understand that the reason their healthcare system is so underfunded and such a mess is because of the current and previous governments -- not just their mismanagement, but their sacking of the national treasury that could have gone into providing these basic rights in health and education. And every dollar that they saw disappearing -- hundreds of thousands of dollars a week in corruption -- at the same time there's no medicine on the shelves in hospitals. It was really a huge driver that they could actually say, "we're dying as a result of this corruption."

IC: One of the other parallels in these two cases that would be helpful to explore is who was allegedly at the top of these various corruption schemes. In both Guatemala and in Brazil, it's been alleged that former presidents headed these schemes. But the way that each president has been implicated in these various plots is worth distinguishing. Professor Allison, could you tell us a little about Pérez Molina's role in the various corruption schemes, and then Professor Taylor, could you compare that to former President Lula's alleged role in the Petrobras case?

MA: Sure, I'd say as of right now the evidence and the narrative is that former President Otto Pérez Molina was at the forefront of the corruption scandal in Guatemala. After he lost the 2007 presidential election, he and his political party reached out to potential campaign contributors and received illicit campaign donations throughout the period from 2008 to 2011, all in return for the expected contracts that would be given should the Patriotic Party come power, which they did in 2011. So, Pérez Molina was really at the forefront of it. A lot of intermediary work was done by his vice president's personal secretary Juan Carlos Monzón,where both the president and the vice president were getting kickbacks from the "La Linea" scandal. The two of them were splitting on just about every illicit transaction that was going on.

MT: I think that this is another place where there's perhaps a distance between the two countries' experiences. Certainly in Brazil there have been allegations against President Lula, and moves by prosecutors against him. But even if we take those allegations at face value -- and even if they were to be proven true -- the allegations so far suggest that in comparison to the scope of the alleged corruption at Petrobas, former President Lula's personal gain from the corruption is on the order of millions of dollars, not tens or hundreds of millions of dollars. Obviously the connection in Brazil to corruption and campaign financing is perhaps the bigger alleged crime. The Workers' Party (Partido dos Trabalhadores - PT), Lula's party, likely siphoned off millions of dollars for campaigns, and of course some politicians benefitted from that. But most of the personal corruption, the corruption that went into the pockets of corrupt individuals, was happening at the level of executives in Petrobras. And as for Lula himself, even the prosecutors seem to suggest his gains at a personal level were relatively small.

That being said, like Pérez Molina, it seems as though Lula had a fixer. Rather than a personal secretary, it was his chief of staff Jose Dirceu, who was implicated in the Mensalão scandal and has been convicted as well in the Petrobras scandal. So, I think that politicians in Brazil perhaps managed to stay a little bit further away from the corruption and from the corrupt operations, but that doesn't mean that their chiefs of staff or their fixers were able to avoid implication.

MA: It gets worse in Guatemala, because you have a scandal that came out in June of this year where it was alleged that members of Pérez Molina's administration -- the different ministers of defense, communications, energy and the interior -- were providing gifts of hundreds of thousands, millions of dollars to the vice president and the president while in office using taxpayer money; giving them birthday gifts of boats, buying them houses in Honduras in the Bay Islands. Whereas the "Cooptation of the State" scandal was benefiting the political party -- it helped them get elected, it helped them stay in office, and they used some illicit money there -- the other scandal with regard to the "Kick-in Campaign" was just pure kickbacks from the different ministers from their positions to the president. And it was all coming from the resources of the state.

We don't know as much about private sector corruption out of the Guatemalan cases as we do with the Brazilian cases. But when it comes to the ports, different businesses were paying less than they should have when it came to port taxes. And so there have been some allegations about who might have been involved in that. But most of the investigations have really been on government officials rather than private sector individuals.

Guatemala's former president Otto Pérez Molina

Photo: Former president of Guatemala, Otto Pérez Molina

MT: You've triggered a parallel -- or rather a difference, in my mind -- that I think is very interesting. It sounds from your account of Guatemala as though the public sector actors have paid the brunt of the price for the corruption scandal, and the private sector less so. And this is almost the opposite of Brazil, where for the first time major executives from very important private sector firms are in jail.

And yet the political actors, for the most part, probably won't be judged for a long time because they are protected. Most politicians, and especially sitting politicians, are given special protections under Brazilian law, which means that it's a very lengthy process. In the Mensalão scandal, politicians involved in that scandal that broke in 2005 weren't actually convicted until 2013. In the Petrobras scandal, it's very unlikely that any of the sitting politicians that have been accused of participation will even go to trial before 2022 or 2023. And so you do have this kind of two-track justice system, where the heads of major corporations are already in jail but the political figures -- with the exception of Lula, who is no longer a sitting politician and therefore doesn't have those protections -- are largely immune to prosecution at this point.

MA: In Guatemala, there are so many corruption scandals or investigations that are underway that are connected to the previous government. But now with the new government in place, we've moved on to the corruption allegations against Jimmy Morales and his family members. So, it's really confusing when you talk just about "the" corruption scandal in Guatemala. But I think we're all focused on the one that was "La Linea," which led more directly to the resignations of the vice president and president. But every few months there's a new corruption scandal that's come out about Guatemala. It's going to take them a while to work this through the Guatemalan court system, which is slow and not very effective. We're at the point where we need to start seeing individuals brought before the court system in a more credible way, and pleading guilty and having some convictions.

IC: That's a good segue to my last question, which is how do you both see the outlook for these cases? What do you see the implications being in terms of the chances of success for these prosecutions, and the odds that they would discourage this sort of behavior in the future?

MA: In Guatemala's case, this is a really key time in the country's history. I don't think many people ever expected you would see a former president and vice president sitting in jail right now on corruption charges. There has been charge after charge leveled against the two of them, backed up by the International Commission against Impunity in Guatemala. And the credibility of that institution is really on the line right now, with whether or not these cases reach a successful verdict in favor of guilty.

What we've clearly learned is that the arrests and resignations of Pérez Molina and Baldetti last year didn't seem to have much of an effect on limiting corruption in the new government. Jimmy Morales was elected last year and took office in January, but we're not convinced that there is any less corruption today or that it is any less of a threat to the Guatemalan system than it was 12 months or 14 months ago. I think it's an ongoing process. It's going to be one that's going to have its highs and lows, but we need to start thinking about whether Guatemala is going to be better off in five years or in ten years, rather than whether or not they're better off today than they were one year ago.

MT: I think what you just said could apply equally well to Brazil. While we've seen gains in terms of the number of cases of corruption that are being brought in the courts, as well as the number of prosecutions and even the number of convictions, it's starting from a very low base. And generally speaking, I would say that the Mensalão scandal that came to resolution in 2013 -- accompanied by the Petrobras scandal, which is at trial now -- these suggest some reason for hope.


 "A lot of the criticisms of the investigations have been minimized by the extensive role of the International Commission Against Impunity in Guatemala. This hybrid institution that's backed by the United Nations has given such credibility to the investigations in Guatemala that it hasn't been susceptible to concerns of partisanship that might exist in Brazil."


But at the same time, those of us who follow Brazil are kind of on tenterhooks hoping that this will continue, but realizing that if it doesn't, it could be potentially devastating in the sense that right now the Petrobras investigation has largely gone after one political party and its allies. It's gone after the Workers' Party and its coalition allies. It has not reached out and looked at other political forces in Brazil, including the opposition that has been referenced in some of the plea bargains. So, I think this is a really important moment in Brazilian history, and one in which it is very important to keep an eye on how the prosecutorial body works outside of the Petrobras scandal, and how the prosecutorial service is able to carry the lessons of successful prosecution from the Petrobras case to other cases. And don't think by any means that this is a story whose conclusion has been written. We have to keep our eye on it.

MA: In Guatemala, I don't think that the perspective is that the investigation of Pérez Molina has been partisan, or that they've only gone after one political party and not the other. Because the political party system in Guatemala is quite fluid and not terribly structured. There is the right in Guatemala, who more or less say that these charges are made up and that the investigations are being used as a tool by the United States to get back at Pérez Molina for pursuing drug decriminalization. But a lot of the criticisms of the investigations have been minimized by the extensive role of the International Commission Against Impunity in Guatemala. This hybrid institution that's backed by the United Nations has given such credibility to the investigations in Guatemala that it hasn't been susceptible to concerns of partisanship that might exist in Brazil. On the other hand, these are the incumbent governments, and at least in Guatemala's case, they have been able to track the corrupt activities in real time. So, it makes much more sense to go after the incumbent than to try to prosecute what we assume was happening in all of these other previous administrations.

MT: That's a really good point. They're not messing with just anybody.

MA: Yeah, and I think it comes up again for me in neighboring El Salvador. There's a lot of concern on the left there that the investigations by the attorney general have gone after the ruling leftist Farabundo Marti National Liberation Front (Frente Farabundo Martí para la Liberación Nacional - FMLN), not the rightist opposition Nationalist Republican Alliance (Alianza Republicana Nacionalista - ARENA) party. We all imagine that many members of ARENA were corrupt. But they were in charge of the executive branch from 1989 to 2009, and it's much more difficult to go after irregularities and corrupt activities from ten or 20 years ago than it is members of the FMLN that have been in power since 2009. This is when we have the evidence. This is where wiretaps and electronic evidence comes into play. There's a practical reason why going after the most recent officials makes sense.

MT: I think that's a very good point. In the Brazilian case, that is the argument that has been made at the federal level. And I'm not trying to equate the types of evidence that are available, but I think that there has been less of an effort at the state level where the opposition to the PT had been governing and there were credible allegations of corruption at the state level that were simultaneous to the accusations of corruption at the federal level. And so that's a little bit different. Essentially, Lula and the PT are accused of having stolen at the federal level when they were in office, but at the same time the Brazilian Social Democracy Party (Partido da Social Democracia Brasileira - PSDB) is accused of having engaged in wrongdoing at the state level. The treatment that the two have gotten has been very different, although there we might point to the fact that the prosecutorial services are also different -- that is, charges at the state level need to be brought by state prosecutors not by federal prosecutors. So I think your point is a good one, but in the federal system in Brazil there is some grounding for the allegation that there has been disparate treatment.