Guest Post: Memo to the U.S. — Central America Needs More Anticorruption and Rule of Law Support, Not Less

The Trump Administration recently decided to terminate foreign assistance to Guatemala, Honduras, and El Salvador and to abandon America’ long-standing support for the United Nations/Guatemalan commission fighting corruption in Guatemala. In today’s guest post, retired U.S. Ambassador Stephen G. McFarland explains that corrupt officials and drug lords in the region are conspiring to “capture” these nations’ governments. Their citizens are already fleeing the countries in droves. How much greater will the pressures to migrate be if a coalition of corrupt politicians and narco-trafficantes takes over one of their governments? On national interest as well as humanitarian grounds, the ambassador argues that the United States should not only restore, but increase, support for anticorruption and rule of law programs.  

The April 17 arrest of Guatemalan presidential candidate Mario Estrada and accomplice Juan Pablo Gonzalez on drug trafficking charges has major implications for U.S. policy towards Guatemala and Central America’s “Northern Triangle.”  The U.S. Department of Justice (USDOJ) asserts that in January 2019, Estrada allegedly attempted to obtain Sinaloa cartel support for the assassination of rival presidential candidates in Guatemala’s upcoming June 2019 general elections and for financing his election campaign. In return, he allegedly promised that, if elected, he would give the cartel free reign to use Guatemalan ports and airports to traffic cocaine to the U.S.

If the USDOJ’s allegations are true: Continue reading

The Economic Benefits of Golden Visa and Golden Passport Programs: A Response to Professor Stephenson

In the past few months, there has been a healthy debate on this blog about “golden visa” and “golden passport” (GV/GP) programs, following reports by Transparency International-Global Witness and the European Commission on the corruption risk associated with these programs. In his post a few weeks ago, Professor Stephenson goes even further, contending that such programs carry no economic benefit and should therefore be abolished. I respectfully disagree. Even taking the status quo as is, the $28 billion these programs have brought in over the past decade make them a savvy tool for nations seeking to attract investment. All GV/GP programs are not equal, and there are vast differences in the transparency and potential for abuse across countries. Reforming GV/GP programs with high degrees of risk, as discussed previously on this blog, is a better answer than abolishing them, since the concerns raised are straightforward and addressable.

Professor Stephenson’s post focused only on the economic aspect of GV/GP programs, so my response will do the same, but it is worth noting that a lot of the criticism of these programs comes from the ethical questions they raise over whether one should have the “right to buy citizenship.” Though this objection is not my main focus here, I can’t help but point out the irony of worrying about the unfairness of a system that allows the wealthy to buy citizenship against the background of a system that confers the privileges of citizenship simply by an accident of birth, and in which immigration systems are so badly broken that, for example, immigrants to the US face a 150 year-long waiting time for a green cardthrough routine channels. But my main focus here is on Professor Stephenson’s argument that GV/GP programs lack a sufficient economicbenefit to justify the corruption risk, and on this question, I believe he is mistaken. 

Let’s start with some top-line numbers: The sale of EU passports accounted for as much as 5.2% of Cyprus’s GDP in 2017. Portugal’s scheme has delivered close to €4 billion to the economy. Malta enjoys a budget surplus because of its growing trade in residency and citizenship. Over in the Caribbean, income from GV/GP programs has contributed up to 25% of the GDP, and even the majority of government revenue. The outsized impact of these programs is hard to deny. Professor Stephenson does not contest the accuracy of these or similar statistics, but he denies their significance for several reasons, each of which is flawed:

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Golden Visa/Passport Programs Have High Corruption Risk and No Demonstrated Economic Benefit. So Let’s Abolish Them.

We’ve had a couple of posts recently (from regular contributor Natalie Ritchie and guest poster Anton Moiseienko) about the corruption-related problem associated with so-called “golden visa” and “golden passport” programs (GV/GP programs), which grant either residency (golden visas) or citizenship (golden passports) in exchange for “investments” (or sometimes simply direct payments to the government) that exceed a certain threshold. Both Natalie and Anton reference recent reports by Transparency International-Global Witness and the European Commission, both of which focus in particular on the EU, and which are both very useful in documenting the risks associated with these residence/citizenship programs—including though not limited to corruption and money laundering risks. That said, the solutions proposed, while certainly helpful, feel a bit thin, in part because both the TI-GW and EC reports assume that these programs have at least some legitimate uses, or at the very least that it would be overstepping for outsiders (be they international bodies, other countries, or NGOs) to try to coerce states into abandoning these programs altogether.

My inclinations are somewhat different, and a bit more radical: I’d push for abolishing these programs entirely—certainly the golden passport programs, but probably the golden visa programs too. The risks associated with GV/GP programs are well-documented in Natalie and Anton’s posts, as well as the TI-GW and EC reports (and other sources), so I won’t dwell on them here. In short, as these and other sources convincingly demonstrate, GV/GP programs may provide safe havens for wealthy criminals and their money, often produce corruption in the programs themselves, and may also have more diffuse pernicious effects associated with the commodification and marketization of membership in a political community. I acknowledge that the risks associated with well-run programs may not be huge, but they’re not trivial, either. And I can’t for the life of me figure out what benefits these programs could have (to society, not to the governments that run them) that could possibly justify those risks.

The usual story is that these programs attract necessary foreign investment, stimulate the economy, and create jobs and raise government revenue. I’m no macroeconomist, and so I may be about to reveal my ignorance in embarrassing fashion, but I have yet to hear a convincing argument, let alone see a persuasive study, that establishes that these programs indeed have substantial economic benefits. Let me explain my puzzlement, and if I’m obviously misunderstanding some crucial point, either about how the programs work or about the economics, I hope some readers out there will correct me. Continue reading

A Border Patrol Surge Will Lead to a Border Corruption Surge

The United States Customs and Border Protection service (CBP) is the largest law enforcement agency in the United States—and one of the most corrupt. CBP employs 59,000 people, of whom almost 20,000 are Border Patrol agents. Every day, these agents process over a million incoming U.S. travelers, 300,000 vehicles, and 78,000 shipping containers. On any given day they might seize over 5,000 pounds of narcotics and apprehend nearly 900 people at or near U.S. borders. Yet according to “conservative [] estimate[s],” about 1,000 Border Patrol agents—5% of the total—violate their official duties in exchange for bribes. To take just a handful of some of the most egregious examples: One CBP agent permitted smugglers to bring over 612 kilograms of cocaine into the U.S. in exchange for $1,000 for each kilo he waved through his checkpoint. Another allowed 1,200 pounds of marijuana to enter into the U.S. in exchange for $60,000. Yet another CBP agent permitted vehicles containing undocumented immigrants to enter the U.S. at a price of $8,000-10,000 per vehicle.

In response to this widespread corruption, the Department of Homeland Security convened an independent Integrity Advisory Panel in 2015. But the Panel’s 2016 report fell on deaf ears, as almost none of its 39 recommendations were implemented. Instead, in line with his hardline stance on immigration, President Trump signed a 2017 executive order mandating hiring an additional 5,000 Border Patrol agents and “appropriate action to ensure that such agents enter on duty . . . as soon as practicable.”

Increasing the number of agents by 25% without devoting significant resources to combat the pervasive corruption in CBP is a terrible idea, and is likely to exacerbate current corruption problems, for three reasons: Continue reading

Corruption and Federal Pensions: A Case for Rewriting the Hiss Act

David Lee, an employee of the Department of Homeland Security, was tasked with investigating a foreign businessman accused of sex trafficking.  Instead of doing his job, however, he did something very different: He solicited and received $13,000 in bribes to report that that the foreign in question was not involved in criminal activity.  This case is not that unusual. In the last ten years, according to a report by the New York Times, immigration enforcement officials have taken over $5 million in bribes. They’ve sold green cards, ignored illegal activity, and even given information to the very drug cartels they are tasked with combating.

Shockingly, however, even after these officials are fired, they remain eligible for federal pensions. This is not unusual, but rather typical: most federal employees convicted of bribery remain eligible for their government pensions.  This was not always the case: The original 1954 version of a statute called the Hiss Act (named for Alger Hiss, a State Department employee who was convicted of passing state secrets to a communist agent) prohibited the payment of a federal pension to a former federal employee who had been convicted of federal law offenses related to bribery and graft, conflict of interest, disloyalty, national defense and national security, and more generally to the exercise of one’s “authority, influence, power, or privileges as an officer or employee of the Government.” In 1961, however, Congress amended the law to prohibit the payment of pensions only for convictions for serious national security-related offenses. The reason for the change was the view that the original version of the Hiss Act went too far, leaving former federal officials (who had already been punished with termination, fines, and imprisonment), as well as their innocent spouses and children, facing the possibility of destitution. The additional punishment supposedly did not fit the crime, unless the crime directly concerned the national security of the United States.

The impulse not to over-punish is commendable, but the 1961 amendment to the Hiss Act was an overcorrection. The law should be amended to find a middle ground between the 1954 and 1961 versions. The federal government should have the authority to at least limit, and occasionally bar, pensions to certain public officials who have been convicted of a corruption-related offenses such as bribery and extortion. The case for doing so is as follows:

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