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Guatemala’s Reformist Government: Back to the Old Ways

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Guatemala’s Reformist Government: Back to the Old Ways

Brussels Does Not Lend Credence to Putin’s Nuclear Threats


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Guatemala’s Reformist Government: Back to the Old Ways
807 words | 4 minutes reading time


The Guatemalan government has had reasons for joy in the past few weeks. After months of gridlock in Congress, where the ruling party, Semilla, holds a mere 23 seats (and is subject to a long-running court battle with the Public Prosecutor’s Office), the government was met with success in key votes to advance its legislative priorities. Such success was far from miraculous and did not come cheaply.

  • Semilla’s unofficial leader in Congress, Samuel Pérez, has demonstrated his knack for negotiation. In general, Semilla’s Congressional delegation appears more willing to close potentially controversial deals with other parties, which are famously fond of pork barrel politics.

  • Of course, President Bernardo Arévalo and his entourage are bound to celebrate their party’s Congressional victories. In all other regards, however, they wish to cling on to their exquisite metropolitan liberal bona fides. 

Echoes of Lina Khan. Last week, Congress passed the country’s first Antitrust Act. The law is relatively moderate and did not go quite as far as some had feared. Certain legal guarantees were introduced to limit, but not completely eliminate, the risk of politicization. The law will not be fully enforced until late 2026.

  • Antitrust legislation had been high on Semilla’s list of priorities since entering power in January. The law, which enjoyed the U.S. Embassy’s support, appeared to lose momentum towards the middle of the year, but recent backroom deals ensured that 122 out of 160 deputies voted for it.

  • Although the phase-in period appears long, work will soon begin on setting up the Superintendencia de Competencia, the country’s new antitrust agency. Selecting the agency’s directors will prove a fraught process, with the law granting Arévalo significant, and arguably excessive, leeway.

  • Penalties under the Antitrust Act are only civil in nature. This has somewhat allayed suspicions that business activities could be used as an underhanded avenue to criminal prosecution for political opponents. Nonetheless, the approach taken by the Superintendencia will heavily depend on its directors, who are yet to be named.

Power of the Purse. On Wednesday, Congress also approved the 2025 budget. At Q148.52 billion ($19.29 billion), it is by far the largest in Guatemalan history. It is 7% larger than the current budget, which had already been expanded at the government’s request, and 22.6% larger than the 2024 budget as originally enacted.

  • The 2025 budget deficit is expected to rise to 3.4% of GDP. This goes against the wishes of fiscal conservatives, who would have preferred a fiscal deficit below 2%, but is in alignment with Semilla’s stated goals of expanding public spending and establishing the foundations of a Guatemalan welfare state.

  • The vast majority of the budget will go towards ordinary state consumption and preexisting entitlements, rather than the investment the country so desperately needs. Thus, it is feared that the expanded budget will solely serve to increase public sector salaries and bureaucracy. There are also concerns surrounding the government’s ability to execute its budget.

  • Defenders of the budget argue that public spending remains relatively low by global standards and that in any case, tax receipts have increased this year. This has not assuaged the fears of fiscal conservatives, who look askance at the Bank of Guatemala’s $3.25 billion in planned bond issues for 2025.

Yes, But. Both the Antitrust Act and the 2025 budget have been questioned in their own right, but the circumstances surrounding their approval have also attracted criticism. Indeed, while Semilla is wont to blame the rest of Congress for controversial budget items, it is widely believed that the country’s center-left, reform-minded government resorted to “old-school” negotiation habits to advance its legislative agenda.

  • Perhaps the best example is the Q5 billion ($649 million) budget increase in favor of Guatemala’s corrupt, notoriously inefficient, and pork barrel-laden Regional Development Councils (CODEDEs), bringing their total budgetary allocation to Q9.33 billion ($1.21 billion).

  • Some analysts have also revealed their reservations regarding the recently approved Law for the Integration of the Agricultural Sector, which allows for self-proclaimed farmers and ranchers to declare several years’ worth of unreported earnings. 

  • This law has been promoted on technocratic grounds as a way to regulate the sector and boost tax receipts. It is nonetheless bound to simplify money laundering; as such, dirty money is likely to enter the banking system, with its holders arguing the funds form part of the proceeds from sales of cattle.

Balance. The Guatemalan government has much to celebrate. It has discovered how Guatemalan political machines are oiled. Some may regard this as a betrayal of Semilla’s principles; others are just as likely to deem it a reasonable, practical avenue to political success.

  • It remains to be seen whether the government’s popularity will suffer significantly. Budgets and antitrust legislation are, after all, highly technical affairs that quickly escape the media cycle. 

  • Indeed, public criticism has primarily been aimed at one particular budgetary provision: an increase in deputies’ monthly base salary from Q29,150 ($3,785) to Q46,700 ($6,064), equal to an Appeals Court judge’s pay.

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PRESS REVIEW

What We’re Watching

US hits Venezuelan security chiefs with sanctions for ‘electoral fraud’ [link]

Steff Chávez and Joe Daniels, Financial Times

Washington has imposed sanctions on 21 key officials of Nicolás Maduro’s regime, including senior officers of the National Guard, police, and intelligence services, accusing them of being complicit in the electoral fraud of the July presidential elections in Venezuela. The State Department has also implemented new visa restrictions, expanding the number of sanctioned individuals to almost 2,000. However, the White House has chosen to maintain the licenses that allow companies such as Chevron to operate in Venezuela, effectively permitting Caracas to collect around $500 million a month in oil revenues. U.S. officials are proceeding cautiously; they fear that excessive sanctions could exacerbate the economic crisis in Venezuela, leading to an exodus of U.S.-bound migrants.

El Salvador president proposes ending country’s metals mining ban [link]

Associated Press

Salvadoran President Nayib Bukele has called his country’s ban on metal mining “absurd,” arguing that exploiting El Salvador’s vast gold reserves could boost economic development. According to Bukele, El Salvador has the world’s densest gold deposits, with preliminary studies identifying over 50 million ounces of gold. If these studies are correct, El Salvador’s gold has a market value of $131 billion, equal to 380% of the country’s GDP. For months, environmental NGOs have warned that the president could seek to reverse a mining ban introduced in 2017. This should now be taken for granted.

Research Update: Panama Ratings Lowered To ‘BBB-/A-3’ On Higher Interest Burden; Outlook Stable [link]

S&P Global

S&P has lowered Panama’s credit rating from BBB to BBB-, leaving the country’s bonds one step away from losing their investment-grade classification. The downgrade is due to an increase in public debt, which has reached $53.81 billion, and weak tax receipts, partly as a result of Cobre Panamá mine’s closure. S&P forecasts that the fiscal deficit will gradually fall from 6% of GDP in 2024 to 3.3% in 2027; it expects GDP growth to remain at 4.1% from 2025 onwards. While noting that the country’s economic outlook is stable, S&P stressed the need for tax and pension reform to stabilize public finances.

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Brussels Does Not Lend Credence to Putin’s Nuclear Threats
767 words | 4 minutes reading time


Tensions are on the rise between Russia and Ukraine. Despite global fears of nuclear escalation, Brussels is not unsettled by the events. 

The Facts. Last week, President Joe Biden authorized Ukraine to use U.S. long-range missiles against Russia. On Nov. 19, when Russia’s “special military operation” reached its 1000th day, Ukraine launched six Army Tactical Missile System (ATACMS) missiles against a Russian arsenal. This is the first time that Ukrainian President Volodymyr Zelensky has been explicitly authorized to use these weapons against Russian territory. 

  • Zelensky has refused to confirm or deny the news, which was first reported by Russian outlets. He was nonetheless quick to note that Ukraine has its own long-range Neptune missiles and access to ATACMS, adding that Ukraine intends to use them.

  • On the same day, Russian President Vladimir Putin declared that Moscow would consider any aggression by a non-nuclear country involving a nuclear state as a joint attack against Russia. 

Why It Matters. Ukraine’s use of ATACMS against Russian territory is certainly a novelty. This is made even more significant by the fact that shortly thereafter, Ukraine launched British long-range Storm Shadow missiles at Russia for the first time. This all points to an escalation in the Russo-Ukrainian conflict, but Brussels remains unbothered, at least in relative terms. 

  • República was able to confirm—firsthand—that despite widespread concern over the course of the war following Donald Trump’s victory, last week’s events were expected in the European Parliament. 

  • In the halls of the Espace Léopold, the European Parliament’s home in Brussels, there is some tension, but no surprise, in the air. 

  • Much to the chagrin of some EU member-states, recently reelected European Commission President Ursula von der Leyen’s promise to back Ukraine “for as long as it takes” remains unchanged. 

Between the Lines. Brussels fears Trump, not only for his aggressive trade policy against Europe, but also for his stance on the war in Ukraine. The Biden administration has been a major boon to Europe, with the White House allocating around $183 billion to bolster Zelensky’s military campaign. At the onset of the war, Europe had little hope for Ukraine, but U.S. involvement has allowed Brussels to breathe more easily. This shows signs of changing. 

  • Trump’s boast of ending the war within the first 24 hours of his second term certainly alarms Europeans. Second only to the warring nations themselves, Europe has the most to gain from peace, but it fears the terms of a hypothetical Trump-brokered armistice. 

  • For Europeans, Trump’s urgency to end the conflict could entail the formal concession of Ukrainian territory to Putin. Many in Washington, and even in some European capitals, regard this as a fait accompli.

Key Takeaways. Members of the European Parliament told República that the outcome of the conflict remains shrouded in uncertainty. Their greatest fear is that Trump’s urgency could lead to a ceasefire without sufficient peace guarantees for Europe’s future. However, the theory of a possible “Berlin-style” solution—semi-formally dividing Ukraine into spheres of influence and allowing Putin to keep what he has conquered so far—is seen as increasingly plausible.

  • Therefore, in Brussels, it is widely believed that the United States will seek to escalate tensions and reclaim as much Ukrainian territory as possible before Trump’s inauguration. Trump wishes to broker a peace deal from a position of strength.

  • In fact, although Republicans have complained about Biden escalating the conflict they wish to end, Europeans hold this decision could not have been made without Trump’s implicit approval.

  • In Brussels, it is thought that the decision was not only approved by the president-elect, but also requested by Trump himself during his meeting with Biden to plan the transfer of power. It is possible that this amounts to an exaggeration, but it suggests Trump is not opposed to current efforts. 

To Close. Putin’s nuclear saber-rattling was expected, but it was accorded little weight. A nuclear attack against Ukraine would be far too costly and would yield little military benefit for Moscow. Additionally, such a measure would damage the relationship between the Kremlin and Beijing, a key element to Washington’s current strategy. Putin would lose far more than he would gain. 

  • The “Berlin-style” solution would also involve the potential integration of “Western” Ukraine into NATO, something that frightens Putin, as it would place the weight of Article 5 at his borders. 

  • Many deem this very unlikely, with another possibility being a Korean-style demilitarized zone in eastern Ukraine. Moscow is also bound to call for Ukraine to declare itself officially neutral in a post-war context.

  • As such, the current panorama obliges each party to engage in demonstrations of strength. If Trump is to force peace talks, both Russia and Ukraine wish to reach an advantageous position before they take place.

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