Guatemalans Vote as Violence Fuels Former General’s Election Bid

Guatemalans vote in presidential elections today as mounting violence damps investment in Central America’s biggest economy and raises the popularity of a former general who has promised to clamp down on drug gangs.

Opinion polls predict Otto Perez Molina will run well ahead of rivals Manuel Baldizon and Eduardo Suger, though he’s unlikely to garner the 50 percent plus one vote needed to win outright and avoid a Nov. 6 runoff.

Perez, who heads the opposition Patriot Party, emphasized during the campaign his role in ending the country’s 36-year civil war in 1996. He has denied the 1999 findings of a United Nations-sponsored truth commission, which said massacres and abuses described by about 9,000 witnesses and survivors amounted to a government policy of genocide.

“I was in the army for 30 years, but I have a democratic vision,” Perez said in an interview broadcast on Canal Antigua on Sept. 9. “I was part of the country’s process of democratization. The next president’s responsibility is to strengthen institutions.”

Voters are likely to ignore human rights abuses committed during the conflict, for which officers under Perez’s command were jailed, and elect Perez on his pledges to take a hard line against crime, said Heather Berkman of the Eurasia Group, a political risk consulting firm.

“Perez’s security experience is an easy way to make a mark with voters,” Berkman said in a phone interview from New York. “Violence is the main issue on everyone’s mind.”

Opinion Poll

Perez has 48.9 percent support against 18.1 percent for Baldizon and 11.4 percent for Suger, according to a poll published by El Periodico, a Guatemala City-based newspaper. The survey of 1,008 people, conducted by Borge y Asociados between Aug. 30 and Sept. 2, had a margin of error of 3.1 percentage points.

Guatemala is the world’s eighth-largest coffee producer and an exporter of vegetables, bananas, sugar and gold. It has a murder rate of 45 per 100,000 inhabitants, compared with 20 for all of Latin America, according to the World Bank.

Perez, 61, has campaigned on the same “mano dura,” or strong hand, slogan as in his 2007 presidential bid, when he lost to President Alvaro Colom in a runoff. He was the head of military intelligence and part of the negotiating team that ended a civil war that pitted indigenous groups demanding civil rights against the state. More than 200,000 people were killed during the conflict.

Organized Crime

Perez consolidated his lead after Guatemala’s constitutional court last month threw out the candidacy of former first lady Sandra Torres, who divorced Colom to try to circumvent a constitutional ban on relatives succeeding the sitting president. The country’s constitution also prohibits Colom from seeking a second, consecutive term.

In its 2011 World Report, New York-based Human Rights Watch blamed “weak and corrupt law enforcement” for failing to contain “powerful organized crime groups.”

Colom has ordered two state of emergencies since December as he seeks to dislodge drug traffickers from jungle-laden areas near the Mexican border. In May, he sent additional security forces to the region after Los Zetas, one of Mexico’s most violent drug gangs, was linked to the killing of 27 ranch workers. The Zetas may be competing for Guatemalan turf with Mexico’s Sinaloa cartel, according to a U.S. State Department report released in March.

Criminal gangs have forced coffee farmers to hire armed escorts and install global positioning systems in trucks to prevent theft, Guatemala’s National Coffee Association said in March. Colom blamed the drug mafia for the killing in July of Argentine folk singer Facundo Cabral, who was gunned down in a car while on tour in Guatemala City.

Rivals

Baldizon, 41, a congressman and logistics business owner who opposed a free trade agreement with the U.S., recently moved family members from his hometown in the drug-scourged Peten region after they received death threats. This is the third presidential bid for Suger, 72, a doctor of mathematical physics from Austin-based University of Texas and the founder of Guatemala’s Universidad Galileo.

Victory in the first round, with more than 50 percent of the vote, would give Perez a stronger mandate for increasing taxes, which are among the lowest in the region, to fund a security buildup, said Boris Segura, an economist who covers Latin America at Nomura Securities.

The central bank forecasts Guatemala’s economy will expand 3.5 percent this year, led by growth in mining. The IMF in April forecast 3 percent growth, below the 4.7 percent expansion it predicts for the entire Latin American and Caribbean region.

Investment Stagnates

Investment in the $41 billion economy has stagnated ahead of the vote, said Carolina Castellanos, head of the American Chamber of Commerce in Guatemala City. After jumping 22 percent in 2010, foreign direct investment is expected to grow 1 percent this year to $668 million, according to an October review of the country’s finances by the International Monetary Fund.

“Investors will be waiting to see what decisions and concrete actions the next government takes to confront high insecurity,” Castellanos said by e-mail.

Standard & Poor’s put Guatemala’s credit rating on negative watch in August, citing low tax revenue and pressures to increase security spending. The company rates the country’s debt at BB, two levels below investment grade, while Moody’s Investors Service rates Guatemalan bonds Ba1, or one level below investment grade.

Guatemala last sold debt in international markets in September 2004, issuing $330 million of 30-year bonds. The yield has increased 24 basis points, or 0.24 percentage point, to 6.47 percent in the past year.

Crime and social challenges may be beyond the power of the next president to resolve, no matter who is elected, said Kevin Casas-Zamora, a senior fellow at the Brookings Institute, a Washington-based public policy research organization, and former vice president of Costa Rica.

“Guatemala has such profound problems that I’m not sure any of the candidates can turn the country around,” he said.

To contact the reporter on this story: Eric Sabo in Panama City at esabo1@bloomberg.net; Blake Schmidt in Bogota at bschmidt16@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.

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