How's that political will working out, Mr. Biden?

Gladys Olmstead and Martin Rodrigues Pellecer have a few interesting reports on how national mega-businesses have declared themselves maquilas under the law so as to receive special benefits from the government, including paying fewer taxes and quicker response times (Los famosos detrás de las 47 maquilas: Ayau de la UFM, jefe de Pronacom y hermanos de diputado del PP, 47 megaempresas se registran como maquila para pagar menos impuestos).

According to the Central American Institute for Fiscal Studies (Icefi), economists, businessmen and opposition congressman, several large, Guatemalan companies have violated the spirit of a 1989 law that was designed to attract foreign investment to industrialize the country. Montana Mining, Monsanto, Kern's, Procter & Gamble, Cemex, Bimbo, large palm mining companies are examples of "maquilas" that have benefited from these laws. They do not scream maquila. The focus of the two articles, however, seems to be on those Guatemalan so-called maquilas businesses that have reaped the rewards.

To no one's surprise, though, they have used the law to avoid taxes which not only deprives the state of much needed revenue. Guatemala collects some of the lowest tax revenue relative to GDP of any country in Latin America. The fact that their political and economic elite have little interest in paying taxes like the rest of the world's businesses has been a source of constant criticism from the international community. The 1996 Peace Accords called for increasing tax collection which the elites scoffed at. The international community considered (and might even have cut some) reducing assistance to the country because its elites were not contributing their share. We here the same with the Alliance for Prosperity.

However, the tax breaks are not just a form of corruption depriving the state of much needed revenue, but they are a form of protectionism against competitors. Several of the companies that receive the tax benefits are connected to politicians across the political spectrum it would appear, including several in the governing Patriotic Party (PP). Jesus Antonio Ralda Sarg (PP) and his two brothers are discussed in depth in the article. Then there's the Kong family's palm oil plantation, yep, a maquila. The maquilas also sells millions of quetzales worth of goods to the Guatemalan State. They claim that there's no conflict of interests. Most of the businesses benefiting from the tax breaks didn't bother to respond to Nomada's requests for further information. Politicians, "maquilas," and CACIF don't really seem to care what anyone else thinks.

So what new industry and politician might benefit from the extension of these tax privileges originally designed to increase investments in the maquila industry but now to benefits friends? The hotel industry. And who specifically might benefit? Perhaps the next president of the country, Manuel Baldizon.

We'll have to ask Mr. Biden how this reflects a real commitment on the part of Central American elites to make difficult choices.

Latin America Will Tackle Corruption Later