Trouble in the “Northern Triangle”
Published in Journal of Democracy
Forrest D. Colburn is a professor at the City University of New York and a visiting professor at INCAE Business School in Costa Rica. Arturo Cruz is a professor at INCAE. They are the authors of Varieties of Liberalism in Central America: Nation-States as Works in Progress (2007).
In Guatemala, a 2015 corruption scandal led to public protests and then the removal of the country’s vice-president and president. Disgusted with traditional politicians and their parties, Guatemalans turned to a comic named Jimmy Morales, electing him president by an overwhelming 67 percent in an October runoff after he led the first round with 24 percent in a fourteen-candidate field. As one Guatemalan told us, “All we had in the election as a viable choice was a voto de castigo (punishment vote). Who knows what Morales will do—or can do? I expect little.” Morales’s own political party is a scraped-together affair with only eleven places in the 158-member Congress that the voters chose last September, on the same day as the presidential first round. Thirteen parties have seats in Congress. The Guatemalan predicament throws into relief some of the problems that beset democracy in Central America’s so-called Northern Triangle (Guatemala plus Honduras and El Salvador). Guatemalan parties are all too often riddled with corruption, beholden to powerful individuals, and ineffective. Yet ousting or shattering them makes political fragmentation worse and can create dangerous political vacuums. The political elites of these countries—and those abroad who wish to help—will have to accept uncomfortable tradeoffs if they want to address pressing problems.
Despite the Northern Triangle’s chronically low levels of “human development”—the bitter fruit of poor governance and a lack of public investment in social services—the end of Cold War–era civil conflicts led to widespread optimism regarding these countries. There was faith that incipient democracies would bring peace and stability, which coupled with economic reforms would spur investment and growth. To complete the virtuous circle there would not only be more jobs and foreign exchange, but also higher tax receipts to fund long-overdue investments in health and education.
There are disappointments. Guatemala, Honduras, and El Salvador remain poor, with narrow resource bases to support reforms. Not only is poverty high, but so are crime and social disintegration. El Salvador currently has the world’s worst annual rate of 104 “intentional homicides” (as the World Bank terms them) for every 100,000 residents.1 This grim record formerly belonged to Honduras, with Guatemala not far behind. Domestic violence, too, is rampant—and unchecked—in the three countries.2 Democracy in these three countries is weak, marred by political fragmentation, party instability, corruption, and feeble state capacity. Low growth persists, as does dependence on the export of commodities both traditional and new—the latter being the unskilled labor of emigrants who send money home. Indeed, remittances from Guatemalans, Hondurans, and Salvadorans working abroad (mostly in the United States) have become so economically important that all three countries might fairly be said to be “exporting themselves.”
The contrast with neighboring Nicaragua and Costa Rica is striking. Nicaragua under President Daniel Ortega (in office since 2007) is stable with low crime rates. The economy, led by a rejuvenated agricultural sector and foreign investment, is growing. Costa Rica earns most of its foreign exchange from tourism, but its many entrepreneurs offer a cornucopia of nontraditional exports that are competitive in the international economy.
Honduras had two center-right parties, the National Party and the Liberal Party. They alternated in power, and the absence of an ideological schism between them facilitated widespread corruption. As a local quip put it, they “ate from the same plate.” Unions, peasant groups, and other actors tending toward the left of center had no representation and were left with “the street”: Honduras has long suffered from disruptive political protests, including blockades and strikes.
President José Manuel “Mel” Zelaya, elected as a Liberal in 2006, tried to veer left, fashioning himself as the Hugo Chávez of Honduras. His bid to alter the constitution to allow for his reelection led on 28 June 2009 to the military seizing him, still clad in his pajamas, and bundling him onto a plane to Costa Rica. In the aftermath of these events, a left-of-center Liberal faction split off to form a party called Liberty and Refoundation (LIBRE), while the remaining Liberals stayed more or less in the center.
The Liberal split left the National Party as the strongest. Its Juan Orlando Hernández (known as JOH) emerged from a four-candidate field as the plurality winner of the presidency on 24 November 2013.
In elections held the same day for the unicameral 128-member National Congress, his party won the largest single bloc (48 seats). President Hernández has been forceful and effective, but he has been spooking Hondurans—especially those in the business sector—with his own talk of wanting to change the constitution so that he can run for reelection. He has recruited more than twenty veterans of President Rafael Correa’s administration from Ecuador in order to improve tax collection, but Honduran business leaders are charging “tax terrorism.” Make a remark that irks the president, they say, and you will find auditors showing up at your door to inspect your books (a complaint also heard in Ecuador). Hernández’s loudest and most persistent critics, though, have been youth in Tegucigalpa and other cities. In weekly marches, they protest the corruption and impunity of the government. As in Guatemala, political change in Honduras has to date resulted in frightening political fragmentation. Destroy a major party because it is corrupt or ineffective or has been hijacked by an opportunist, and what is left is a vacuum.
In 1992, peace accords ended El Salvador’s civil war. In 1994, the leftist former guerrillas turned their organization, the Farabundo Martí National Liberation Front (FMLN), into a political party, competing in elections against their opponents on the right, the Nationalist Republican Alliance (known as Arena). These two parties have formed the political center of gravity in this compact country, which has the smallest land area and most densely packed populace on the isthmus. Arena and the FMLN compete against each other vigorously, a circumstance that may help to hold back corruption—opponents are ready to pounce on any misdeed. Yet neither party has been able to trigger growth, and the economy remains stagnant. Arena, which had first won the presidency in 1989, succeeded in winning three subsequent presidential contests, a remarkable feat in contemporary Latin America. Still, fatigue set in, traceable in large part to the economic torpor.
In 2009, the FMLN’s Mauricio Funes, a popular television journalist, won the presidency. His term, which ended in 2014, is now recalled mostly for his purchase of a Maserati sports car and his habit of cavorting with women. Funes was succeeded by a true guerrilla fighter from the ranks of the FMLN, Salvador Sánchez Cerén. Since assuming office in June 2014, Sánchez has continued some modest social-welfare programs that Funes began—for example, helping children to obtain school supplies—but Sánchez has not jumpstarted the economy with innovative policies. He was born in 1944, and is widely rumored to be ill. He makes trips to Cuba that are believed to be for medical care.3 A survey revealed that after his first year and a half in office, 53 percent of Salvadorans disapproved of his governance, the worst “score” for any Salvadoran president in eleven years.4 (In neighboring Nicaragua, President Ortega has an approval rating of 75 percent.)
An anecdote heard lately in Central American business circles has a prominent Costa Rican visiting El Salvador and asking a business leader there what is new, only to be told “Nothing. There is nothing going on here.” Disenchantment with both Arena and the FMLN is growing to alarming levels, but the level of distrust in the country, a legacy of the civil war, is paralyzing. It chokes all efforts to renew or rehabilitate these two parties. Yet politically, where would El Salvador be without them? They at least provide a measure of institutional stability.
A second dilemma confronting political elites in Guatemala, Honduras, and El Salvador involves the collection of taxes. As a region, Latin America has a low incidence of tax payment. Tax payments are especially low in poorer countries such as these three, which leaves the state without resources to address endemic poverty. In Guatemala, for example, tax receipts represent only 10.5 percent of GNP, while in Chile they total 20.2 percent.6 Economic elites in Central America’s Northern Triangle adamantly resist tax increases. Whenever one is proposed, they complain that if state funds were not “stolen,” there would be sufficient resources.
There can be little doubt that the stark social differences within each country undermine a sense of national solidarity and shared responsibility. These differences are especially pronounced in Guatemala. There the affluence of Guatemala City’s well-heeled neighborhoods stands in stark contrast to the poverty of highland villages where much of the country’s large Mayan population (about 40 percent of Guatemala’s 14.5 million people) still resides. Political leaders need additional resources to address poverty. The World Bank estimates that 60 percent of the 8.5 million people in Hondurans live below the poverty level. Resources are also needed to reduce crime, which may be an even more urgent need, both politically and economically.
Rising violent crime has led to public clamor for governments to act. The model for how to respond comes from Colombia: “Put a police officer on every corner.” Increasing the number of public-security officials and improving their training (and perhaps even their pay) will be expensive. In Colombia, special taxes were levied, beginning in 2002, but only—to appease taxpayers—for limited periods and with special reviews to account publicly for funds spent.7 Funes tried to secure such tax increases in El Salvador, but failed. Efforts in Guatemala at raising taxes for the sole purpose of enhancing public security have been stymied as well. In Honduras, President Hernández has raised taxes, but only against considerable opposition from businesses. He has also cut other spending (by freezing public-employee salaries, for instance) in order to free more money for public-security purposes. Thus Honduras typifies the dilemma here: With taxes static and unevenly collected, public-safety spending is all too likely to “crowd out” expenditures on social services, including education and health care.
In Mexico, the homicide rate tripled between 2006 and 2014 amid conflict between the federal government and drug cartels. In response, spending on public security doubled. Oil revenues paid for this increase at first, but with oil prices down, financing public security has become harder in Mexico. In the Northern Triangle of Central America, scanty resources and precariously situated political leaders weaken the ability to tackle crime. The international community—and the United States in particular—provides some assistance, but the focus is on drug trafficking and money laundering, not pressing concerns for the broad majority of Guatemalans, Hondurans, and Salvadorans.
There was incredulity in Honduras—and also in neighboring Guatemala and El Salvador—when in October 2015 the United States indicted members of a rich and powerful Honduran family named Rosenthal. Jaime Rosenthal, who had been the country’s vice-president back in the 1980s, was charged with money laundering. So were his son (a former cabinet minister) and a nephew. While there have long been rumors and allegations of “mafias,” “crime syndicates,” and, above all, drug trafficking along the east coasts of Honduras and Guatemala, the indictment of the Rosenthals—who are pillars of the economic and political elite in Honduras—has stoked a sense that crime pervades all levels of society in this region. Making matters even worse have been corruption scandals implicating former presidents such as Francisco Flores of El Salvador and Alfonso Portillo and Otto Pérez Molina of Guatemala. In Honduras there is outrage that the Social Security Institute was pillaged of $200 million by the former director and his colleagues. Hefty contracts were signed with phantom companies. The public was further incensed when the sitting president, JOH, admitted publicly that his election campaign received some of the funds siphoned from the Social Security Institute.
The extent of crime in the Northern Triangle leads to the most vexing dilemma: How far should the police and military be empowered? In order to tackle crime, including corruption at all levels of government, it will be necessary to improve and professionalize the police and the military forces, who have always shared responsibility for “security.” In addition to the funding problem, there are obvious concerns that arise with the proposal for handing security forces more autonomy and authority. During the 1980s and before, police and military forces in these countries were responsible for gross human-rights violations. They acted with impunity. It is worrisome to think now of empowering the police and armed forces, above all when governments appear weak and riddled with corruption.
Living on Remittances
Another challenge that presents Northern Triangle political leaders with a dilemma is economic reform. At present, these three economies seem to be largely safe from the shocks that are buffeting much of Latin America, including both Mexico and the larger South American countries. Indeed, unlike Brazil, Mexico, or Venezuela, the Northern Triangle imports rather than exports oil and thus is benefiting enormously from the fall in petroleum prices. The region is tied economically to the United States, and is benefiting from its economic recovery, including through increases in remittances. The Economic Commission for Latin America and the Caribbean (ECLAC) projects modest near-term growth across all five Central American countries.11 Yet the Northern Triangle is poor, so growth is from a low base. Exports are mainly low-value commodities such as sugar and coffee, or simple finished goods from assembly plants (maquilas). Guatemala’s main export is sugar, while Honduras grows coffee, with close to a third of its populace employed in that sector. El Salvador’s most important export is T-shirts.
The most dynamic facet of the Northern Triangle economies is the migration of their citizens to work in the United States, from which they send money home to relatives. The importance of these remittances to Central America cannot be overstated. An estimated fifth of all Salvadorans now live in the United States. Remittances are said to total well over $4 billion per year, a sum equal to 78 percent of the value of El Salvador’s goods and service exports (the true figure is actually higher than 78 percent because so much of what El Salvador exports comes from Salvadoran assembly plants that require hefty imports to operate).14 El Salvador is a country of “consumption”: Shopping centers abound while agriculture has lost its sway. The forest reclaims what used to be cultivated fields, while food is imported. In Honduras, remittances are worth 93 percent of the value of the country’s exports of goods and services. In Guatemala, the corresponding figure is a smaller but still substantial 58 percent.
Nearly all those who migrate to the United States are looking to improve their economic fortunes. True, there is threatening violence in the Northern Triangle of Central America, but it is concentrated in big cities, and the population movement is not to peaceful villages or isolated rural areas within these countries, but to North America. Relatives and friends already ensconced in the United States offer help and encouragement to those pondering migration.
A prominent economist and former president of Costa Rica’s Central Bank, Francisco de Paula Gutiérrez, worries that remittances act as a “narcotic” and threaten to render Central American societies too passive. Remittances come not only at the cost of lost population (and therefore human capital), but depend heavily on the vagaries of U.S. immigration policy and the desire of those who have gone north to “remember” their relatives who remain behind. The Northern Triangle’s national elites, including the intellectual classes, have not searched energetically for a more secure, dignified, and remunerative place in the world economy. As Gutiérrez adds, “I worry that it is getting late for these countries to construct viable economies.”
Why has there not been meaningful economic change? The answer points back to the political world. Political leaders have been weak. A former Guatemalan president, Álvaro Arzú, once said that he was nothing more than a fireman (implying he just went rushing about to deal with emergencies). The central problem with economic policy in the Northern Triangle is that you can get in trouble for what you do or try to do, but not for what you omit to do. For too long, the political incentives have been piling up on the side of “do nothing” and “there is nothing new here.” Yet problems are festering in Guatemala, Honduras, and El Salvador. These problems need attention, and they need it urgently.