from Development Channel

This Week in Markets and Democracy: Tackling Corruption in Guatemala, Snap Elections, and AGOA’s Challenges

Workers stand on top of bags of sugar at the Mumias sugar factory in western Kenya February 24, 2015. In the sugar cane fields...ain-fed plots rather than large irrigated plantations, costs are much higher than Kenya's competitors (Reuters/Thomas Mukoya).

August 28, 2015

Workers stand on top of bags of sugar at the Mumias sugar factory in western Kenya February 24, 2015. In the sugar cane fields...ain-fed plots rather than large irrigated plantations, costs are much higher than Kenya's competitors (Reuters/Thomas Mukoya).
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CFR’s Civil Society, Markets, and Democracy (CSMD) Program highlights noteworthy events and articles each Friday in “This Week in Markets and Democracy.” 

International Anticorruption Efforts Seem to be Working in Guatemala

A far-reaching battle against government corruption is unfolding in Guatemala. Prosecutors have uncovered a widespread customs bribery ring through the use of wiretaps, email interceptions, close monitoring of individuals, and financial analyses. They accuse government officials of siphoning off tens of millions of dollars in import duties. Evidence suggests that the fraud’s biggest beneficiaries have been Vice President Roxana Baldetti (who resigned and is awaiting trial), and President Otto Pérez Molina, who so far is resisting demands for his resignation. Whether now or later, it is quite likely both will face jail time—a first for this nation and all of Latin America.

These investigations should hearten international anticorruption fighters, showing that international efforts can make a difference even in places with weak institutions and long legacies of graft and impunity. Leading the charge is the International Commission against Impunity in Guatemala, or CICIG. Founded in 2006, CICIG is a UN-funded independent prosecutor’s office (the United States has contributed some $25 million since its formation) dedicated to strengthening Guatemala’s judicial and security institutions. In this latest and most ambitious case, CICIG’s head, Colombian-born prosecutor Iván Velásquez Gómez, has worked closely alongside the Guatemalan public prosecutor’s office, bolstering their investigations into government corruption. CICIG’s success has led to calls by citizens of El Salvador and Honduras for their own version of the organization.

How Democratic Are Snap Elections in Turkey and Greece?

In the past week, both the Greek and Turkish governments have called snap elections. With ruling Syriza party ranks split over heavy austerity measures, Greek Prime Minister Alexis Tsipras resigned and called for new elections September 20th. In Turkey, where the neighboring Syrian war and Kurdish insurgency threaten stability, President Recep Tayyip Erdogan called parliamentary elections for November, and designated his hand-picked successor, Ahmet Davutoglu, as interim Prime Minister to oversee the vote.

Scholars tout the benefits of this parliamentary electoral mechanism, enabling leaders to avoid gridlock or a lame duck administration (both perils of presidential electoral regimes). Yet politicians use these elections strategically—dictating the schedule to maintain their political advantage at times in ways that do little to further democratic inclusion or legitimacy.

In Greece, Tsipras looks to shuffle his coalition, abandoning the anti-austerity platform that brought him to power last February. The quick turnaround leaves little time for other parties to form a government or rally around voter opposition voiced in a July referendum. Meanwhile, Erdogan is betting that early elections will bolster his power after the Justice and Development Party (AKP) lost its parliamentary majority in June and Davutoglu failed to form a coalition. (Opponents charge the move was an attempt to thwart them from forming their own alliance).

In both places the leaders are following the democratic rules, yet invite debate over their democratic legitimacy. While shoring up support through early voting may be preferable to an imminent “no” vote, leaders can also manipulate snap elections to extend power in times of political and economic crisis.

AGOA’s Challenges Rooted in Structural Weakness

U.S. and African officials met this week in Gabon to flesh out what Congress’s ten-year extension of the African Growth and Opportunity Act (AGOA) can mean. Since AGOA began in 2000, duty-free market access for thirty-nine sub-Saharan African countries has boosted U.S.-bound exports fourfold to over $26 billion. Yet to truly increase African global competitiveness, a renewed AGOA pact will need to grapple with the economies’ structural challenges. Commodities dominate African trade—oil comprises nearly 90 percent of AGOA exports. The trade deal won’t move Brent crude prices. Another source of exports, agriculture, has yet to modernize—the majority of sub-Saharan African jobs remain in low-productivity farm work. And the United States is reluctant to provide market access—the newly-authorized AGOA provides more technical assistance for agriculture but does little to eliminate tariffs and quotas for African sugar and cotton producers.

The U.S. and African officials could and should focus on helping get goods to market. Sporadic electricity, bad roads, silted ports, and general transportation costs are up to ten times higher in sub-Saharan Africa than in Asian economies, eliminating the upside of large and affordable labor forces. For example, slow logistics and customs procedures keep Ethiopia’s growing coffee and flower industries from reaching their full potential. Though total U.S.–Africa trade increased during AGOA’s first fifteen years, the $26 billion represents just a small fraction of U.S. imports. And the vast majority of non-oil imports came from South Africa. Unless agriculture, infrastructure, and structural barriers are tackled, AGOA won’t make a significant difference for Africa’s companies, workers, and broader economies.

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