Event

In the past months, Guatemala's political and judicial institutions have been severely tested. President Jimmy Morales expelled a UN-backed anti-corruption commission chief, Velasquez, who had recommended that Morales be investigated for corruption. Velasquez claims that suspicious irregularities occurred in Morales’ 2015 presidential campaign financing. Morales, a former comedy actor, won those elections with the slogan ‘no more corruption, no more thieves’. Though the Constitutional Court of Guatemala suspended Morales’ order, the president ignored the court order. An ad hoc congressional committee advocated for lifting the President’s immunity. However, this month, Guatemala's congress overwhelmingly voted down the motion, twice even. Congress also approved a ‘national emergency’ decree to curb penalties for illegal election financing, only to withdraw it a couple of days later. In the meantime, protests have been on the rise in Guatemala while key ministers have been fired or resigned.

Impact on country risk

The vote against lifting the president’s immunity is a major victory for Morales and puts his presidency on firmer ground. However, his position is not completely out of the woods as corruption allegations will continue and public support is weakening. Two years ago, president Molina was shorn of immunity after fraud and kickback scheme allegations. The stripping of immunity was partly attributable to huge protests. Therefore, if protests garner further steam, it could still topple president Morales. The heightened political tensions and the exit of key officials will likely also have economic consequences. It can undermine government efforts to boost growth (estimated at 3.3% in 2017) by public spending and major infrastructure works. An escalation of the political crisis can deteriorate investor sentiment and consequently growth. Furthermore, it is possible that critical US financial assistance will be withheld since it is contingent on Guatemala cooperating with anti-corruption commissions. The unfolding political crisis is not likely to be over soon. It even has the potential to deteriorate into a constitutional crisis testing Guatemala's weak institutions.

Analyst: Jolyn Debuysscher, j.debuysscher@credendo.com