This article first appeared in La Hora on May 22, 2021.
The George W. Bush Presidential Center published this week an analysis of the Northern Triangle context and how crime, corruption and weak rule of law have affected the economic indices of Guatemala, Honduras and El Salvador. Using the Bush Institute’s Global Competitiveness Scorecard, it was determined that all three countries rank below 45% competitiveness.
“We examined the effects of crime, corruption and weak institutions on the economic performance of El Salvador, Guatemala and Honduras. The legal system and property rights indicator of the scorecard, which measures the effectiveness and integrity of a country’s government, shows that all three countries rank in the bottom quintile,” the text highlights.
The Presidential Center describes how in the northern Central American region, entrenched elites and even criminal organizations are able to evade prosecution thanks to corrupt systems in Guatemala, Honduras and El Salvador. In the Corruption Perceptions Index Guatemala and Honduras rank among the most corrupt countries in the world, the former at 149th out of 180 nations and the latter at 157th; El Salvador ranks 104th.
For the institute it is evident how the legal systems of the Northern Triangle are hampered by public sector corruption, likewise, it explains that there is a strong relationship between a nation’s performance on the Legal System indicator and GDP per capita, which is used to rate the standard of living of the population.
“This shows that nations with weak legal systems often struggle to promote the investment needed to grow their economies and maintain a high standard of living for their citizens. El Salvador, Guatemala and Honduras each have a GDP per capita of less than US$10,000. The GDP per capita of the United States exceeds US$65,000,” the Bush Center stressed.
The negative indices are not only due to the current conjuncture, as the study reveals that each country has seen a worrisome decline in its score over the past 10 years. Guatemala has dropped from 29 percent to 18 percent and Honduras from 20 percent to 15 percent. El Salvador’s drop was the most dramatic; the country fell from the 41st percentile in 2010 to the 16th percentile in 2020.
Additionally, El Salvador, Guatemala and Honduras were found to rank in the lowest decile for safety-related measures in the World Economic Forum’s Global Competitiveness Index. The Economic Forum’s index points to a lack of security, high homicide rates and the pervasiveness of organized crime in the region.
The aforementioned data creates an environment of insecurity and violence, which leads to a discouragement of foreign investors, which in turn impedes the development of opportunities for the inhabitants. Faced with a lack of opportunities in their home countries, people are forced to migrate in search of better livelihoods, they note.
“Beyond the obvious threats to personal safety, crime and violence have economic repercussions. When a city or neighborhood is unsafe, businesses have difficulty attracting customers and employees. Legitimate entities face persistent extortion from illicit actors, such as gangs,” describes the George B. Presidential Center.
According to the report, in nations with low levels of security and high levels of corruption, business owners often feel they must bear the full cost of protecting their assets or be forced to pay bribes to government officials or local gangs in exchange for permits to operate.
The picture that any country should offer local and foreign businesses is one where patents, business incorporations, dispute resolutions and proper security processes are guaranteed. When these protections are absent, it becomes riskier for businesses to operate and incentives for innovation and economic growth are eliminated.