32 years of economic and political information and analysis on the region

GUATEMALA

Seeking payments from big business at local level

Guatemala boasts the lowest local tax collection rate in all of Central America. Scarcely 1% of taxes are currently collected by municipalities. This situation explains the widespread economic weaknesses of municipal governments and their inability to resolve local problems. Local governments attribute some of these problems to the excessive consumption of natural resources on the part of big businesses, which refuse to comply with tax obligations.

COSTA RICA

CIA terms country "potential hot spot"

On March 17 2005, Porter Goss, director of the US Central Intelligence Agency (CIA) presented a report on threats to national security in which Costa Rica was included as a «potential flashpoint». While some analysts consider these statements unfounded, others attribute them to mistrust stemming from recent events in the country. Some analysts point to the deterioration of the social security system and increased imbalances in income distribution as key factors in any potential social instability. However, others believe national unrest is due to government policies that have damaged North American interests in the country.

REGION

Volatility in world coffee prices impacts Central America

The current price of Arabica coffee is the highest in seven years, due to a combination of scarcity and world market speculation. Nevertheless, the crisis of 2001 and 2002, marked by the lowest prices in half a century, has profoundly affected the sector. First, there is a growing divide between the price market trends in Arabica and Robusto coffee that favors Central American exports. Secondly, there has been a dramatic fall in coffee production in regions where low quality coffee dominates, with El Salvador the most affected. Also, the recent crisis contributed to a rise in migration to the US and the sale of land by smaller cultivators who were forced to abandon their harvests. Although the price to the producer has doubled since 2002, the salaries that coffee workers receive has not reflected this increase in many regions. Coffee analysts announced that the peak in the price, in large measure, results from strong speculative investments in the futures market and the hoarding of coffee stores by wholesalers. This trend could reverse itself in the near future.

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SALVADOR

State condemned for disappearances

The Inter-American Court of Human Rights (IACHR) ruled that justice had not been done in the case of the disappearance of the Serrano sisters in 1982, just after the start of the civil war in El Salvador. The government has been ordered to recognize its responsibility for the crimes to the international community, make a public apology to the victims' relatives and pay them US$703 thousand in damages.Were the state not to agree to these demands, it would join Cuba in being the only countries not to comply with this type of ruling, as the verdict cannot be appealed. The Human Rights Ombudsman (PDDH), the Farabundi Martí National Liberation Front (FMLN) and human rights organizations have asked for the Amnesty Law to be abolished; however, president Saca and a majority of deputies have turned down the request.

Anti-corruption law reforms under fire

The National Anti-corruption Council (CNA, in Spanish), established by Executive Decree 015-2001 during the government of Carlos Flores (1998-2002), remains out of session and without a leader, following the resignations in September 2004 of its executive director, Germán Espinal, and its president, Cardinal Óscar Andrés Rodríguez. The former resigned on the grounds of being upset by the Executive's ill-timed reaction to criticisms of inaction concerning countless corruption cases. In a move that he considered underhand, Espinal was called upon to justify his comments in court. Meanwhile, the Cardinal justified his own departure by claiming he did not have enough time to carry out his Council duties due to constant travel commitments. The CNA offices in the Executive building Las Lomas remain empty since the resignations, and Council's current location remains a mystery.

NICARAGUA

Companies not ready for CAFTA

The recent health warning issued by the US government to American consumers to avoid eating Nicaraguan cheese has cast doubt over the ability of Nicaraguan companies to take advantage of the opportunities of the possibe Free Trade Agreement with the US (CAFTA). The news comes at a time when national dairy producers are beginning a transformation process from small scale artisan to industrial production. The campaign has forced the government to tighten quality controls on dairy products.

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15 April 2005