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Central American University - UCA  
  Number 155 | Junio 1994
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Guatemala

The Rich Don't Want to Pay Taxes

After Haiti, Guatemala is the Latin American country with the lowest tax burden. The president is pushing a feeble reform, but the rich are not accepting it and threaten with business closings and coups. Meanwhile, the military is preparing its strategy in order to foil the United Nations mission.

Trish O' Kane

A tense calm prevailed in the country following the Holy Week violence last month, and particularly the assassination of the Constitutional Court president. President Ramiro De León Carpio did not fulfill his threat to declare a state of emergency, but kept open the possibility of doing so in coming months.
In response to the March violence, De León put a new security plan into action by sending a joint army police force to patrol the streets. Terror is so internalized in Guatemalan society that such an announcement is enough to upset daily routines. The streets remained desolate for the first few nights after the policy went into effect.

Waiting on the UN

All of the powers that be in society are hunkering down, readying themselves for the United Nations verification mission, which will arrive in June or July for a stay of at least a year. A preliminary UN mission arrived on April 25 for a two week evaluation of the financial and technical requirements that will be indispensable for international verification.

Everything that happens in Guatemala from now on will be related to the mission's arrival. This event, unprecedented in the country, has disconcerted the traditional dominating groups.

The peace process continues on track, accelerated by international pressure. In April and at the beginning of May various public forums were held in Guatemala with the participation of grassroots organizations, high level military officers and members of the government negotiating team. The army representatives in this forum were more accepting than before of a commission to investigate past crimes. The armed forces faction that prefers a "political war" over military conflict supports this position.
April ended with a serious conflict between the private sector and the President. De León sent a weak tax reform proposal to Congress, but the legislators appear to have decided not to approve it. Tax reforms in Guatemala, no matter how weak, have historically provoked violent reactions, including coup attempts.

The Armed Forces: Two Factions

After so many years of stagnation in a peace process aimed at putting an end to the longest military conflict in Latin America, the sudden start up of negotiations and the speed of the change is surprising. The army, which just two months ago publicly rejected international verification and the creation of a Truth Commission, now appears willing to accept all of this. The controversial Truth Commission will come up for discussion in another round of talks in Mexico on May 21 24.
"The change in the armed forces is palpable, because they are no longer starting from their polarized position. They have obviously joined the world trend toward dialogue," stated grass roots leader Nineth Montenegro in one of the forums on the peace process. "The actions of some army members make clear that they are trying to convince the majority of their colleagues of the need to change and clean up their image, to take on their appropriate role in society."
To understand the reasons for this shift, it is important to remember that there are different factions in the army. People in Guatemala now speak publicly of two: the institutionalists, led by Colonel Otto Pérez Molina, head of the Presidential Joint Chiefs of Staff, and the hardliners, who are led by already retired generals. The institutionalists believe in a "political war" and have a long term vision of the army's role in society. The hardliners simply oppose the peace process; they are not strategic thinkers who take into account the changes that have occurred throughout the world.

Buying Time

When De León took power, he immediately made an alliance with the institutionalist sector. A year ago, the correlation of forces within the army was unfavorable to the institutionalists, who had to wait to put their strategy in place. According to one diplomatic source, this explains why the government's first peace plan, known as the "Pink Plan," was even more hard line than the one presented by former President Serrano. The conditions for flexibility simply did not exist.
"The government and this sector of the army needed time to be able to later move forward with the peace process. The faction had to consolidate its power within the armed forces," says one diplomat. The shifts made in the army in February, when hardline General José Quilo Ayuso was retired and changes were made at all levels, consolidated power for the institutionalist faction. It should thus not be surprising that the peace process would begin to bear fruit in the last two months.

"This faction is trying to figure out how to get as much as possible out of the peace process. You don't have to pretend that they are masked democrats, but they realized that a military coup would not be well looked upon internationally. They are trying to preserve the institution through the changes," the diplomat explained.

Savvy Strategy

The institutionalists are not happy about the UN's arrival, and even less so about the possibility of a Truth Commission, but they have been planning how to deal with the situation for months. According to analysts, their strategy for the UN verifying mission is to get more national organization members on it than international UN members. This strategy has two goals: reduce the size of the mission and pressure to make human rights training be the focus rather than investigations of violations.

The argument that military leaders like retired General Hector Gramajo use to support this strategy is that the UN focused more on investigations in El Salvador, with the result that the country lacks people trained to continue the verification work when the UN pulls out.

For the future, "national human rights organizations in the country have to be strengthened," comments Gramajo, stressing that a small mission can count on the already extensive network of human rights organizations in the country. This sounds wonderful, but anyone knows that a national representative of a human rights organization out in the countryside will not, for example, have the same power or courage as a UN representative to enter military bases without previous notification.
At the beginning of the year, a civil judge dared to enter a base in Chimaltenango with a legal order to search for a disappeared person. After the military leaders insulted her and kicked her off the base without letting her carry out the search, the judge began receiving death threats. In April she asked the Supreme Court of Justice to transfer her somewhere else to "reduce the psychological war being waged against me."
According to the wide ranging Human Rights Accord signed by the URNG and the government in March, the mission's mandate is limited to investigating only incidents that occur during their stay in the country. This accord leaves the repressive forces several more weeks "free" to do as they please before the mission arrives.

Sacrificing Some

The strategy of the army's institutionalist sector toward a possible Truth Commission is more complicated. The truth will be harder to manipulate than the United Nations. "There is no white or black in the army," declared an international source. "Everyone was involved in the massacres because it was institutional policy."
The strategy attempts a self cleaning of the armed forces before any Commission is created, sacrificing some individuals who have committed crimes and are being tried in order to save the institution. The retirements of recent months are part of this strategy. "Change is coming and the institution will no longer cover everyone's crimes. Some people will have to pay the consequences of their acts," as one military analyst put it in February.

Various articles appeared in newspapers in April noting that low ranking military men were involved in common crimes, kidnappings, rapes, robberies and the like. The news was mixed in with other information, as if it was nothing strange, but it is the first time that this correspondent has seen such news in print. It appears to be part of the same strategy.

"Don't be surprised if we see a general behind bars before long," commented the international source. Two generals are currently being charged with crimes: retired General Gramajo, for a corruption case while he was minister in the 1980s; and General Godoy Gaitán, for involvement in the Myrna Mack case. Gaitán was Chief of the Joint Chiefs of Staff when one of his subordinates, Noel de Jesus Beteta, assassinated Mack, an anthropologist, in 1990. Beteta was sentenced to 30 years in prison.
Sacrificing some for the good of all is a risky strategy that could easily slip from the army's control. The consolidation of this sector's power is very recent and the hardliners may continue creating problems for some time. Some analysts believe that the anti foreigner campaign unleashed in March is evidence of this and also of the hard-line sector's ability to operate at will throughout the country.

A source very close to the President did not dismiss the possibility that this strategy of "managing the truth" may set off an intense war within the army. "It could be an Al Capone type war, between two bands."

Newspapers for Sheets

After Haiti, Guatemala has the smallest tax burden in Latin America. Taxes are only 7% of the country's Gross Domestic Product, according to Hector Luna Troccoli, General Secretary of the Presidency. This helps explain why dire poverty in this country is second only to Haiti in all the categories established by the United Nations to measure quality of life: infant mortality, percentage of immunized population, doctors per inhabitant, etc. Guatemala also stands out on the continent for having the most unequal income distribution after Brazil.
Nobody complains as they do in other countries about the deterioration of public services, because there have never been any, except for a modest social security system implemented during the Arévalo and Arbenz governments. Of a student population of approximately 5 million, the system fails to serve 3.5 million. The same pattern exists in health. The current hospital situation is so serious that newspapers are used to wrap up newborn infants due to a lack of sheets.

The private sector firmly resists any attempt to change this situation through tax reform. As ex President Vinicio Cerezo recalls, "We submitted the country's first tax reform legislation and suffered two coup attempts. Some private business sectors currently owe more than 3 billion quetzales in taxes, an amount that would resolve the government's fiscal crisis."

A Mild Reform

Under pressure from the International Monetary Fund to resolve this crisis, De León sent a tax reform proposal to Congress in April. According to the shadow accord he signed with the IMF in 1993, the government must increase its tax income until it reaches 10% of the GDP. The current deficit puts this agreement in danger and endangers new loans from the World Bank and the Interamerican Development Bank.
In a televised message to the nation on April 20, De León explained the serious fiscal crisis and the need for the reforms. According to the President, there is a 40% evasion of the value added tax (IVA), and 50% of the income tax, while the fiscal deficit is some 960 million quetzals. De León declared that the tax model was outdated and appealed to people's patriotism in an attempt to motivate them to pay taxes.
The President chose the path of least resistance, increasing taxes on alcoholic beverages by 38% and the airport exit tax by 100%. He did not even attempt to broaden the income tax base, and proposes simply punishing evaders. Fines would be increased and the government could close businesses that are behind on their taxes.

The response to his message was immediate. The very next day, newspaper headlines spoke of strong coup rumors. The private sector categorically rejected De León's proposal, while the grassroots groups and the Catholic Church supported it. "We agree with the reform, which wants those who earn more to pay more. This is good, because we currently have a system where everyone pays the same, whether they are rich or workers," said Fernando López, of the Archbishop's Human Rights Office.

They Will Not Pay

The business sector justifies its refusal to pay taxes by arguing that the state is very corrupt. Most of the population also believes this, but lacks the option of whether or not to pay taxes. Consumers pay through the IVA, which is a sort of sales tax, while business people can avoid paying income taxes through accounting loopholes or by bribing public functionaries.
At the beginning of May, the President found himself between a rock and a hard place: the business sector was threatening to move its businesses to El Salvador if the reforms were put in place, while the government would be breaking its accord with the IMF if they were not. The final decision, ironically, is in the hands of Congress, the core of much corruption in the country.

Return to Petén

Thousands more Guatemalan refugees plan to return home in May and June. Approximately 1,000 will return in June, during the first massive return to Petén, on the border with Mexico. They will settle in the Río Usumacinta area.
These once landless people had first come to Petén from all areas of the country in the 1960s and 70s, in response to government land offers. They colonized this part of the jungle, which borders on the Lacandona Jungle, current home of the Zapatistas in Chiapas, Mexico. Cooperatives were organized along the river, which achieved impressive development levels with support from the Catholic Church.

The zone was left abandoned after the violence of the early 1980s, when the army burned everything and the people escaped across the river into Mexico. Today the schools, clinics, stores and churches are in ruins. Very few refugees have dared cross back over the river in the intervening years, and the upcoming return marks the rebirth of this area of Guatemala.
The province of Petén covers a third of the country's territory. Due to its size and natural characteristics, the zone has been rife with illicit activities, in particular drug trafficking and illegal lumber sales. When the refugees fled, leaving the river cooperatives abandoned, these and other dirty businesses were free to operate in the zone.

Ecological Obstacles?

The repopulation of Petén will touch powerful interests. Two of the country's provinces will be changing, under the influence of populations very conscious of their rights and prepared to defend them. It is not surprising that in April the refugees' leaders accused the government of blocking the return to Petén and violating the signed accords. The government's argument to stop the return is that the Petén area is "ecologically fragile." While the refugees were in Mexico in the 1980s, part of the cooperative area was declared a biosphere reserve and is now integrated in what is known as the Maya Biosphere.
The refugees have been the first to cooperate with government ecological entities and are well aware of the need to take care of the jungle. In March, the National Protected Areas Commission (CONAP) announced that 60% of the cooperative territory that the refugees want to return to lies within the Maya Biosphere. The refugees agreed to settle in the remaining area and help in the area's protection.
When it appeared that the return process was moving forward, the government entities abruptly refused to attend meetings with the refugees and by the beginning of May the return to Petén was totally stagnated. The refugees requested the intervention of international authorities to resolve the crisis so they could return to their country.
"The problems facing this return to Petén are not logistical. There are significant pressures to stop it. The landowners, lumber dealers, army and those involved in illicit activities do not want to see these areas inhabited again because it will be bad for business. The return also represents the threat of a radical change; those who were forced to leave will transform those who stayed," commented a diplomatic source.

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