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BRIEF

Contraband Costing Guatemala 22% of Annual Budget

CONTRABAND / 2 SEP 2016 BY TRISTAN CLAVEL EN

Representatives from Guatemala's agricultural industry have claimed food contraband has increased by almost one-third this year and cost the government over $2 billion in 2015, an accusation that does not bode well for the country's attempt to crack down on its corrupt customs agency.

Guatemala's trade union of food producers (La Gremial de Fabricantes de Alimentos - GREFAL) estimated that food contraband increased by 30 percent this year, reported La Hora. According to Luis Mazariegos, a union representative, contraband cooking oil from Mexico was particularly prominent, representing an estimated 30 percent of all total food contraband.

Other products where GREFAL noted an increase in contraband items included: rice, eggs, pasta products, liquor, tobacco, snacks and sweets.

On top of negatively impacting Guatemalan companies, Mazariegos said the total opportunity cost of these illicit products in 2015 amounted to 16 billion Guatemalan quetzales -- over $2.1 billion -- due to taxes and revenues not collected by the state.

As pointed out by elPeriódico, this lost sum would cover more than 20 percent of the Guatemalan government's 2016 budget of roughly $9.4 billion, underlining the magnitude of the problem. Indeed, the value of contraband passing through 113 border crossings with Mexico, Belize, El Salvador and Honduras is sufficient to cover the entire budget of Guatemala's Education Ministry ($1.8 billion), and is around three times that of the Health Ministry ($728 million).

GREFAL has called for the more enforcement and legal measures to address the problem, arguing that only 13 food contraband investigations were opened in 2015, and only three of those were adequately pursued.

InSight Crime Analysis

The figures presented by GREFAL are significant. Despite suspicion about their accuracy or exaggeration aroused by union's financial interest in the issue, Guatemala's failure to rein in contraband is beyond dispute.

Corruption within Guatemala's tax and customs authority (Superintendencia de Administración Tributaria - SAT) has gotten a lot of attention recently. Last year, President Otto Pérez Molina and his vice president, Roxana Baldetti, resigned from office and were subsequently arrested in connection with a customs fraud scheme, known as "La Línea." Prosecutors allege the scheme involved officials lowering import taxes on goods in exchange for kickbacks. Pérez Molina and Baldetti are currently in jail awaiting trial.

SEE ALSO: InDepth: Elites and Organized Crime

The United Nations-backed International Commission Against Impunity in Guatemala (Comisión Internacional Contra la Impunidad en Guatemala - CICIG) has been supporting the country's efforts to fight high-level corruption to good effect, as La Línea and several other emblematic cases demonstrate.

Despite this progress, the alarm sounded by agrobusiness over the scale of food contraband is a stark reminder that Guatemala still faces deep structural challenges and the fight against corruption must be waged at all levels of governance. 

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