Cross-posted from The Guatemala Times.

Guatemala City. January 20, 2012

The private sector of Guatemala today made it crystal clear to President Otto Perez that they will not agree to any tax increases. Today the Guatemalan Congress was supposed to present an initiative of the official party to reform of the tax system; it has been delayed until Monday. Javier Zepeda, President of Guatemala’s Chamber of Industry, (CIG) and Jorge Briz, President of the Chamber of Commerce expressed that they disagree and propose other methods to increase the revenue of the government.

• Picture: Barbara Schieber, Old Señor Juan, cayuco, Santiago Atitlan, Guatemala •

Today the private sector representatives stated that the initiative to increase taxes divides and confronts the country, they require a dialogue with the Minister of Finance. That dialog has been going on forever. The private sector will not pay more taxes voluntarily, that is for sure.

Guatemala has the lowest revenue in taxes of the hemisphere, after Haiti, some say below Haiti. President Otto Perez, realizing that he has to generate income for the estate to be able to deliver any of his campaign promises, had announced that he proposes a tax reform. Today he got his answer.

On October 27th, 2011, at Guatemala’s “State of World Population 2011” presentation, Leonor Calderón, the country representative of UNFPA, said that only 2 percent of Guatemala’s population owns most of the land of the nation. 7.4 million people are poor in Guatemala; 2.2 million live in extreme poverty. In Guatemala, the population has doubled in less than 30 years, according to the National Statistics Institute (INE), now there are 14 million 313 thousand people. "If the Guatemalan private sector clearly does not assume their responsibility to pay taxes in order to have stronger institutions, there will be gaps and there will be inadequate resources to meet the needs of the population," said Leonor Calderón, UNFPA Representative. The causes of poverty, malnutrition and population growth are structural.

During his time in Guatemala, Carlos Castresana, ex- director of CICIC, Guatemala's International Commission against Impunity, repeatedly made a very simple but illuminating statement: "You get the security and justice that you pay for." Meaning, if you don't want to pay, you don't get any.

On October 12, 2010, at Guatemala’s big donor conference for reconstruction and transformation after Agatha, the Sub- Secretary of the United Nations (UN), the Mexican, Alicia Bárcena, who is also the executive secretary of the Economic Commission for Latin America (CEPAL) warned: “no country in the world collecting less then 10% of GDP and with a public spending of only 4.5% of the GDP, can exercise effective management, it is a State without the power to act”.

Guatemala's IRS is weak and does not go after the big fishes, only the little one. Although a new era might be beginning with the apprehension of some high profile business men charged whit tax evasion and money laundering in the past few months. Also, the recent publications of trade mispricing (import-export) in Guatemala has put the private sector even more on guard.

Global Financial Integrity in their report 2010 found that Developing Country Governments Lose $100 Billion Annually Due to Trade Mispricing. "Every year crime, corruption, and tax evasion drain $1 trillion out of developing countries," said GFI director Raymond Baker, citing figures from Gift’s 2008 report, "Illicit Financial Flows from Developing Countries 2002-2006." This report builds on the analysis put forward in our "Illicit Flows" report by more closely examining one particular form of financial outflow - trade mispricing - and showing how it removes money from a developing economy, in this case by depriving the government of tax revenue.

In “A conversation with Stephen McFarland, United States Ambassador to Guatemala” The United States the United States Ambassador Stephen McFarland stated in October 2009: "Another key issue for the Guatemalan government is fiscal reform. The Guatemalan state is chronically underfinanced," the ambassador said, it has the worst track-record of tax collection after Haiti. McFarland said Guatemalan President Álvaro Colom is keen on reform, but with elections less than two years away, the issue will likely fall by the wayside.” Source: A Conversation with Stephen McFarland, United States Ambassador to Guatemala. By Daphne Morrison. October 20, 2009.

An evaluation brief of UNDP in Guatemala stated in 2009: “The context in Guatemala has been characterized by deep divisions in the population, reflected in a shifting political party spectrum as a consequence of weak coalitions since the Peace Accords. Overall tax collection has traditionally been very low, and the legal framework for public administration complicated.”

Samuel Loewenberg in an article published by the Economist: ¨Malnutrition in Guatemala: A national shame.” August 27, 2009, wrote: It is hardly one of Latin America's poorest countries, but according to UNICEF almost half of Guatemala's children are chronically malnourished-the sixth-worst performance in the world. In parts of rural Guatemala, where the population is overwhelmingly of Mayan descent, the incidence of child malnutrition reaches 80%.- ...What makes this even more distressing is that Guatemala is rich enough to prevent it...Income inequality remains extreme, even by Latin American standards. Two-thirds of the rural population remains poor. Guatemala came second to bottom of a new index measuring inequality of opportunity in Latin America published by the World Bank last year...The government fails to collect enough taxes from wealthier Guatemalans to provide good schools and health care for the majority...several attempts at tax reform over the past decade have foundered in the face of entrenched political resistance.

On February 10, 2010, at a Press conference where the EU announced it's support for the Guatemalan Food Security with 33, 8 M Euros, the representative of the European Union in Guatemala, Rafael Señan Llarena stated that on the causes of the high malnutrition in the country, "it is a problem caused by severe social inequality, a weak state, very low governmental budget and therefore a weak organizational and coordination response of the actions needed to tackle the problem."

A report released early in November 2009, by the Guatemala-based Instituto Centroamericano de Estudios Fiscales (ICEFI) and the United States- and Spain-based Center for Economic and Social Rights (CESR), attempts to tackle the difficult question of why Guatemala has experienced consistent levels of inequality and deprivation despite having the largest economy in Central America. CESR and ICEFI claim that the failure of Guatemala to implement a "fair and progressive" tax policy violates the social and human rights of its citizens and has led Guatemala to fall behind on human development indicators - some indexes put Guatemala on par with sub-Saharan African countries. “A right or a privilege- fiscal commitment with health, education and food in Guatemala ¿Derechos o Privilegios?” Source IPS: Eli Clifton. November 23, 2009.

This has been the beginning of round 1 for the Government of Otto Perez in the “battle of the taxes.” One can only guess how many rounds this fight will go on and if there will be a winner or a compromise. Maybe a settlement under the table and behind closed doors will be a strategy.

In the past no government has ever won the battle to increase the tax revenues dictated by the Peace Accords to finance the states obligation for health, education and basic services for the Guatemalan people.

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Cross-posted from The Guatemala Times.

Guatemala City. The Guatemalan mainstream media has unleashed an increased and endless flow of bad press for President Colom and his government since Otto Perez won the election. Just as it started out in January 2008, the mainstream media – with the only exception of La Hora, had extra-officially declared: no mercy, we take no prisoners. Very much like Fox news treated President Barak Obama when he was elected.

The Media

Anyone who has the illusion that in Guatemala the President elect is the real power is a fool. The power behind the power is and always has been the Guatemalan elite, much the same as in the US, where President Obama has not been able to do anything of what he promised, because it is not convenient for the big money. It is a “moneycracy” not a democracy. Money rules, not the people.

Now the Guatemalan media smells blood and they must endear themselves to the newly elected government of Otto Perez. They are getting bolder and bolder, more offensive and disrespectful as the Presidency of Colom is coming to its end.

Nobody is more lonely then an unpopular President who is going out of office. In Guatemala we have a saying: “when the tree has fallen, everyone wants to make firewood.”

Corrution or corrupters?

Some of the criticism is legitimate; yes there was corruption under Colom. ¿More corruption then under Berger, Portillo and Arzu? We very much doubt it. The complete Guatemalan Congress is corrupt, as has been pointed out by a recent, unusually candid editorial of Prensa Libre, they described that members of congress where paid 130,000.00 quetzales to vote for the new telecommunication’s bill.

Corruption is an issue, the corruptors are another issue. We wrote back in 2008 and 2009, that the narco-gangs and transnational crime that was migrating in from Mexico would have more money then the entire country, they would be able to buy every single public official, politician and military if needed. They would infiltrate the state and the private sector. Cash is always welcome, especially in hard times.

Especially the USA did not listen, the originators of the migration of transnational crime into Guatemala, the American war on drugs in Mexico and Colombia, they pretended that it was all right, a total success, at our expense. No time to think about the countries between their “star war operations”. They forgot about Central America and just re-discover it about 2 years ago.

It was not news then. The Berger government had successfully keep the narco problem a secret, the press did not even know that he left 60% of the Guatemalan territory in the hands of transnational crime. Berger’s Vice -.President, Eduardo Stein, who benefited greatly from his experience, now heads an institution that analyses this very issue. He gave statements to the press 2 years ago where he described the situation. He told the truth too late. There is a saying, never solve a problem that can provide you with future income, Stein definitely applied that logic.

President Colom certainly did not benefit from a good debriefing in security issue form his predecessor. Colom had no idea. His issue was social justice that was his only agenda.

In normal times, it could have worked. But Colom's presidency was by far a normal presidency.

The events that defined his presidency

1. 2008 -2009 world wide economic crisis.

2. The infamous Rosenberg case that almost served the elite to topple the government. It paralyzed Guatemala for almost a year. The cost of that paralysis was enormous for the nation.

3. Natural disaster of unprecedented magnitudes, Agatha and other natural events causing billions of dollars in damages to infrastructure and production, climate change has made Guatemala the second country in the world to suffer the deadly and devastating effects.

4. Narco migration from Mexico, causing unprecedented violence and murders and using up resources for the security sector and justice sector that could have been prevented by the US, but was not.

Colom's biggest weakness, his lack of support and friendship with the military and the Guatemalan elite, ended up being his biggest strength.

Because he had nothing to loose he allowed the work of CICIG. CICIG could only prosper and gain such prominence because Colom´s government was weak in security issues. He needed CICIG and the international community to stabilize the justice sector which had been systematically weakened by his predecessors and their puppeteers.

The people who benefitted the most from impunity wanted impunity to stay in place. The military, the private sector, bankers, corrupt politicians, corrupt ex-politicians, ex- government officials, etc.

The persecution and trials of ex-military involved in massacres and genocide was only possible because of Colom's distance from the military. If Otto Perez had been elected in 2007, this would have never happened.

The unprecedented publications of the national police archives, the military plans Sofia, and many other documents from the internal conflict would have not happened without Colom.

The much celebrated Attorney General Paz y Paz would have never happened under Otto Perez.

The strengthening of the voices of human rights activists, ecological activists, and the civil sectors of society could only happen because there was a vacuum of power that was filled for the fist time by others then the military or the catholic church of Guatemala. For a brief time it was the civil society that had some voice and some power.

Historic memory

Colom's government for the first time in Guatemalan history provided a platform to present the reality of the internal conflict that tore the country apart for 36 years.

Social Solidarity Programs

Another of his weaknesses turned into a historical accomplishment. His ex- wife Sandra Torres was able to implement the Social Solidarity programs, against all odds. She was able to get the resources that no other government had wanted to provide for the Guatemalan poor. Colom was weak or he used her as a tool to be able to do the one thing he really believed in, a little bit of social justice. What Sandra Torres did is historically unprecedented. What she is as a person, more good or more evil, history will decide.

Much can be criticized about this government, many accidents and unforeseen international and national events took Colom by surprise, just as they did to other presidents in the world.

We think that corrupters and bribers are the source of the problem, much more so than the corrupted.

But it is sexy to report about corruption, it is not sexy to report about the corruptors and bribers. They are known to the journalists, here in Guatemala and in most countries, there is a bribery index developed by Transparency International and Global Integrity, the emphasis is on the corrupted, never on the bribers.

That has to change, the cause of corruption are the corruptors, not the other way around.

Just like the drug war problem, the cause of the problem are the user countries, not the transit countries that don’t even get the economic benefit, only the violence, as a return of that scourge.

Colom's team

President Colom had a turbulent, difficult presidency. His team was extremely mediocre, disloyal and in most instances self-serving, betraying the president. It has nauseating to watch many ministers and members of congress only serving their own interests and sacrificing the country. Should these people go to jail for their criminal acts? Absolutely. But then we have to apply the same rules to all members of previous governments in the executive, legislative and justice branches.

Only history can tell the impact of what Colom achieved by accident or intend. History will be the judge, never the media.

Barbara Schieber is Guatemalan, she is a Physician and has a Masters in Education, Evaluation and Research. Her work has been as international expert and activist for Maternal Mortality and Women’s rights. She was a columnist, then she founded her own news site, The Guatemala Times, the only news outlet in English, a window of Guatemala to the world, it is run as a volunteer organization.

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