Profiting from Disaster

IPS recently ran a story on the ways private enterprise and governments alike in Latin America profit from disaster:

 In a country as vulnerable to natural disasters as Guatemala, a “state of public calamity” is frequently declared – to the joy of contractors, which find a good opportunity to line their pockets.

Tourists visiting this mountainous Central American country for its natural, archaeological, and ethnic attractions are inevitably surprised to come across a brand-new mountain road destroyed every few kilometres by rockslides and mudslides, and rebuilt in short order.

The destruction is the result of landslides caused by heavy rains on the unstable, bare hillsides. The underlying cause, deforestation, is not addressed. Instead, the road is destroyed and rebuilt, over and over again.

That is because the construction of roads, as well as the distribution of food, form part of the “big disaster business,” activist Guido Calderón, with the non-governmental Civil Convergence for Risk Management in Guatemala (COCIGER), told IPS.

That companies take advantage of environmental degradation to make profit through projects like reconstructing roads rather than addressing the much more serious problems of environmental degradation is not surprising. However, the Guatemalan governments of the past and present have been just as bad, if not worse, in terms of using disaster to profit, both in terms of rewarding political allies and in attempting to reinforce the state’s legitimacy.

On Feb. 16, right-wing President Otto Pérez Molina, who had taken office a month earlier, declared a state of calamity in the hospital system, in order to increase the flow of funding to the system and solve the chronic shortages of medicine, equipment, and beds.

By June, the health ministry had spent 11 million dollars on direct purchases without public tenders or price comparisons, marred by serious irregularities, Montenegro’s party denounced.

One of the irregularities was the purchase of more than 149,000 vaccines from a pharmaceutical company for 3.2 million dollars, even though the cost was 68 percent higher than the vaccines offered by the Pan American Health Organisation (PAHO), according to Montenegro.

The comptroller-general’s office reached the conclusion that there was no overpricing because the two offers contained different products. But it did rule that there was an “over-supply” of 22,000 doses, whose shelf-life expires in November, which means they will go to waste.

And it’s not like this is a recent innovation under Pérez Molina, or a practice that only the Guatemalan right engages in. Former president Álvaro Colom’s administration faces accusations of misusing $7.7 million dollars in similar “emergency” spending during his administration (2008-2012). This wasteful spending is particularly offensive, as it no doubt comes from a majority of the citizenship that pays taxes, yet very few citizens ever benefit from the government services they theoretically are paying for via taxation. The lack of transparency in Guatemala’s government does not help, either, allowing these types of contracts to be made and this type of spending to take place without the governments being responsible to their citizens. Of course, contracts without bidding only further exacerbate the problem, as the government can either reward its allies and cronies, and/or reward companies and then expect support from them going forward, thereby reinforcing the traditional ties between the tiny minority of economic and political elites in the country, an alliance that goes back at least to the nineteenth century. Left out of all of this are the majority of Guatemala’s citizens, who are left with shoddy products from private industry and a government that fails to provide the basic long-term services and policies that theoretically should protect and represent the interests of its citizens, poor as well as rich. While it would be overly deterministic and foolish to say that things will never change, given the need for broad administrative and electoral reforms, as well as a basic shift in alliances between economic and political elites and/or between the government and the citizenship, it’s hard to see some fundamental transformation taking place any time soon. And those roads and bridges will continue to be rebuilt over and over, even while the broader social and political problems remain.

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About Colin M. Snider

I have a Ph.D. in history, specializing in Latin American History and Comparative Indigenous History. My dissertation focused on Brazil. Beyond Latin America generally, I'm particularly interested in class identities, military politics, human rights, labor, education, music, and nation. I can be found on Twitter at @ColinMSnider.
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