Weekly Report - 02 February 2023 (WR-23-05)

US sanctions Cartes as Paraguay’s elections loom

Paraguay’s electoral race took a twist on 26 January when the US Department of the Treasury’s Office of Foreign Assets Control (Ofac) sanctioned Paraguay’s former president Horacio Cartes (2013-2018), who was blacklisted by the US Department of State last July for significant corruption. The political opposition, which has long been critical of what it sees as the baleful influence that Cartes has over Paraguayan politics, will hope that this might help it overcome the dominance of the ruling Asociación Nacional Republicana-Partido Colorado (ANR-PC) in April’s elections. Santiago Peña, the presidential candidate for the ANR-PC and a Cartes acolyte, said he had been assured by the US ambassador in Paraguay that the former president would have a “right to defence”, and that the measures had “absolutely nothing to do” with his candidacy.

In its statement, Ofac said it had sanctioned Cartes for “involvement in the rampant corruption that undermines democratic institutions in Paraguay”. It went on to list sanctions on four companies owned or controlled by Cartes: Tabacos USA Inc, Bebidas USA Inc, Dominicana Acquisition SA, and Frigorifico Chajha SAE. Ofac also sanctioned Vice President Hugo Velázquez, a fellow member of the ANR-PC, albeit from a rival faction, on the same grounds.

“Treasury is committed to addressing systemic corruption around the world, even in its most entrenched forms and at the highest levels of public office”, Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E Nelson said, adding that the action taken “exposes the endemic corruption undermining Paraguayan democratic institutions and highlights the pressing need for the Government of Paraguay to act in the best interest of its citizens, not line the pockets of its political elites.”   

Ofac provided significantly more detail than the Department of State last July. It accused Cartes of having “engaged in corruption before, during, and after his term as President of Paraguay”. It singled out the “financial investments and incentives to induce the party to eliminate its 10-year length-of-affiliation requirement to enable him to run as the party’s presidential nominee” in 2013, just four years after joining the party, and paying party members up to US$10,000 each to support his candidacy ahead of those elections. While president, Ofac alleged, Cartes made “cash payments to officials in exchange for their loyalty and support” and “maintained his grip on policymaking through monthly cash bribes paid out to loyal legislators” ranging from US$5,000 to US$50,000 per member.

In 2017, Ofac alleged, Cartes had pledged US$1m of his own wealth to buy the votes of legislators to support his bid to advance a constitutional reform to permit him to run for re-election in 2018, although this was unsuccessful, and he had “continued to influence legislative activities after leaving office, targeting political opponents, and bribing legislators to direct votes in his interest. Ofac also sanctioned Velázquez, who it accused of having “engaged in corrupt practices to interfere with legal processes and protect himself and criminal associates from criminal investigations”. It alleged that both men had ties to members of Hezbollah, the Lebanese militant group designated as a terrorist organisation by the US.

Peña, who served as finance minister under Cartes for two years between 2015 and 2017, said in a press conference on 30 January that the US ambassador to Paraguay, Marc Ostfield, had assured him that there were mechanisms of defence for Cartes, and stressed that the sanctions should not be interpreted as interference in the electoral process. Not all members of the ANR-PC interpreted it this way. Basilio ‘Bachi’ Núñez, the leader of the Honor Colorado faction loyal to Cartes in the lower chamber of congress, accused Ostfield of “exceeding his authority”, while alleging that the present government led by President Mario Abdo Benítez, who leads a rival faction of the ANR-PC, had given the US “a nod and a wink”. Núñez also claimed that there was “a road map in place for the Colorado party not to return to government”.

The Abdo Benítez administration announced on 1 February a bill to create a national secretariat of integrity and transparency to supersede the current national anti-corruption secretariat (Senac) established in 2012. The cabinet chief, Hernán Huttemann, said it would for the first time give the country an entity to promote public policy in matters of integrity, transparency, and fighting corruption. Approval of the new body, however, would require the approval of both the lower chamber of congress and senate, where it could be opposed by Cartistas.

The opposition has seized on the accusations against both politicians to urge voters to reject the ANR-PC in the presidential and congressional elections on 30 April, while demanding the resignation of Velázquez. Cartes took over as president of the ANR-PC on 10 January after winning internal elections in December. Efraín Alegre, the presidential candidate for the opposition coalition Concertación Nacional, went as far as to say he would extradite Cartes to the US if he were to win power.

Paraguay joint biggest faller in annual corruption index

Paraguay registered the joint steepest decline in terms of ranking in the annual Corruption Perceptions Index (CPI) table produced by the Berlin-based NGO Transparency International (TI) released this week, along with Costa Rica. It fell nine places to 137th, with its score down by two to 28, where 0 means ‘highly corrupt’ and 100 ‘very clean’. Uruguay was the only country in the region to earn a score of more than 70 in the CPI. Only eight other countries finished with a score over 50, six of them in the English-speaking Caribbean.

The average score for Latin America and the Caribbean was just 41.1, down from 41.8 last year, and with the high-scoring English-speaking Caribbean countries removed, just 35.9, less than half of Uruguay’s score and a full point down on 2021. The only countries to improve their score on 2021, outside of the English-speaking Caribbean, were Uruguay, Suriname, the Dominican Republic, and Bolivia, while seven countries declined and 10 were stagnant.

The report singled out the Dominican Republic (32), which has gained two points in the CPI in each of the last two years, for “strengthening the independence of its justice and oversight bodies, enhancing transparency in public procurement, and enacting an asset forfeiture law - a key legal instrument to combat corruption and organised crime”. Propping up the regionally adjusted table on a score of just 14 was Venezuela, which was above only three countries in the global table of 180. TI commented that in the case of Venezuela, Haiti, and Nicaragua (19), “it is difficult to draw a line between public institutions and criminal activities”.

Corruption Perceptions Index adapted for Latin America and the Caribbean (2022 score and ranking compared with 2021)

Country Score Ranking
Uruguay 74 (+1) 14 (+4)
Chile 67 (=) 27 (=)
Barbados  65 (=) 29 (=)
The Bahamas 64 (=) 30 (=)
St Vincent and the Grenadines 60 (+1) 35 (+1)
Dominica 55 (=) 45 (=)
St Lucia 55 (-1) 45 (-3)
Costa Rica 54 (-4) 48 (-9)
Grenada  52 (-1) 51 (+1)
Cuba 45 (-1) 65 (-1)
Jamaica 44 (=) 69 (+1)
Trinidad & Tobago 42 (+1) 77 (+5)
Guyana  40 (+1)  85 (+2)
Suriname 40 (+1) 85 (+2)
Colombia  39 (=) 91 (-4)
Argentina 38 (=) 94 (+2)
Brazil  38 (=) 94 (+2)
Ecuador 36 (=) 101 (+4)
Panama 36 (=) 101 (+4)
Peru 36 (=) 101 (+4)
El Salvador 33 (-1) 116 (-1)
Dominican Republic 32 (+2) 123 (+5)
Bolivia 31 (+1) 126 (+2)
Mexico 31 (=) 126 (-2)
Paraguay 28 (-2) 137 (-9)
Guatemala 24 (-1) 150 (=)
Honduras 23 (=) 157 (=)
Nicaragua 19 (-1) 167 (-3)
Haiti 17 (-3) 171 (-7)
Venezuela 14 (=) 177 (=)
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