Gold, drugs, and bribes: what hides the corruption scandal in Guatemala
Information leaks help to understand a small Central American country’s significance.
At the end of last week, the Guatemalan Prosecutor’s Office began investigating allegations that certain “Russian businessmen” bribed the President Alejandro Giammattei to get access to a berthing facility at one of the country’s main ports. This was announced on September 3 by the General Prosecutor’s Office.
Juan Luis Pantaleon – a spokesman for the General Guatemalan Prosecutor’s Office – claimed that the prosecutors specializing in anti-corruption cases had initiated an investigation and emphasized that Giammattei is not being on remand since the impeachment procedure hadn’t been launched yet. Patricia Letona – a spokeswoman for Giammattei – said that the Presidential Executive Office had no comments on the issue.
Initially, the accusations were publicly laid by Juan Francisco Sandoval – a former head of the Special Prosecutor’s Office Against Impunity (FECI) who was dismissed by the Guatemalan Prosecutor General Maria Porras in July. According to Sandoval, in April four Russian businessmen engaged in mining in Guatemala sent money wrapped in a carpet as a bribe. It goes about a dock in the Caribbean port of Santo Tomas de Castilla. Nevertheless, the Guatemalan mining company related to the suspects denies the bribery. The President denies any involvement in corruption as well.
Intriguingly that at the same time the General Prosecutor’s Office reported issuing an arrest warrant against Sandoval on suspicion of exceeding official authority and resisting to criminal proceedings. Sandoval fled to the United States. The Guatemalan authorities also accuse him of disclosing confidential data, which provided American press with access to the information of strategic importance.
The “Russian” company with Swiss residence and international relations
Presumably, the mining company refers to Phoenix nickel mine located 130 km from the port in the center of Guatemala. It was a Swiss company Solway, which manages the works there and purchased Phoenix project in 2011 from Canadian HudBay Minerals but had to stop all the operations in February 2021 due to the license revocation.
For the nickel extracted at Phoenix, the Solway-owned structure – Compañía Guatemalteca de Níquel (CGN) – paid royalty to the Government of Guatemala at a record low rate of 36 quetzals (4.65 USD) per ton of ore: below the physical ore extraction cost. The product was sold at the backyard: it was bought by Pronico processing company, also owned by Solway. In 2020, Pronico produced almost 23 thousand tons of nickel, which cost about $0.45 billion (with Solway’s official capital costs in Guatemala being 54 times less).
Thus, it was up to the Swiss company to determine, which part of the resource income to give to Guatemala as taxes and which to put in its own pocket. It is clear that such a transaction required a “front-office decision”, which usually can be obtained for a decent reward.
Swiss Solway is headed by an Estonian citizen, the President of the Eurasian Jewish Congress, the holder of the Estonian Order of the White Star Alexander Bronstein and his son, a German citizen Daniel “Dan” Bronstein. This is the reason why the company registered in Switzerland is often referred to as “Russian” – especially since a large number of Russian and Ukrainian citizens work at Solway in Guatemala. However, the Bronsteins insist that the company is European since its headquarters are located in Swiss Zug town. Solway’s asset network is efficiently disguised using offshore companies in the Mediterranean and the Caribbean and is allegedly related to Lev Blavatnik, a billionaire native of Odessa, who owns Warner Music.
It should be noted that Solway has a project in Russia on the Kuril Islands (OOO KURILGEO), which is engaged in gold mining. Besides, right before Sandoval’s escape to the United States, the company resumed negotiations with the country’s leadership.
Importance of Santo Tomas de Castilla port
The port that appears in the case is located in the Gulf of Honduras, Puerto Barrios town, Izabal District. It’s the place of transit for ships that often smuggle drugs from Colombia. Cocaine is hidden in a special “parasite container” attached to the bottom of a ship arriving from Colombia. Every year, they intercept a few tons of cocaine smuggled on ships of various jurisdictions.
Besides, illegally mined jewelry jadeite also flows through the district, which is almost openly mined in the vicinity of Valle Nuevo village – 10 tons of raw material per week. Presumably, the work is supervised directly by the governor, with jadeite being sold in China and Taiwan.
The US reaction
The Biden administration’s reaction on the current events in Guatemala was heavily negative since it’s clearly related to the US migration policy and the Democrats’ image as fighters against corruption.
The main migration flow to the US comes from Central American countries – directly through Guatemala. Remarkably that the structures of George Soros openly supported the migration caravans in Guatemala. Apparently, the US could have used certain corruption accusations to manipulate Giammattei, forcing him to pursue a particular policy.
This scandal reminded of another corruption issue related to the country’s leadership. Two years earlier, the former president Otto Peres was forced to resign and later imprisoned following the multi-million bribery case.