Chanchullo (Central America)

Chanchullo
Location: Central America
Definition: Fraud; illicit act of benefiting oneself at the expense of others, committed by business owners and public officials
Keywords: Guatemala – El Salvador – Honduras – Central America – North America – Latin America – Fraud – Trade – Informal entrepreneurship – Elections – Public service
Author: Jose Godinez and Denise Dunlap
Affiliation: Manning School of Business, University of Massachusetts, Lowell, USA
Website: Profile page at UML Profile page at UML

By Jose Godinez and Denise Dunlap, Manning School of Business, University of Massachusetts, Lowell, USA

Chanchullo is a term common in Latin America that denotes an illicit act done with intention to benefit oneself at the expense of others. Chanchullo is defined by the Royal Academy of the Spanish Language as fraud. Its origins can be traced to 1700s Spain where people referred to practical jokes as ‘chanza’ – from the Italian ciancia with the same meaning – and the person who performed the practical jokes as “chancero” which morphed into chanchullero (Diccionario Libre 2020). In Central American countries the term chanchullo is unique because it specifically denotes practices used by businesses to take advantage of customers, and by governments to take advantage of their constituencies.

Chanchullo can be committed by an individual, business, or government. An example of this expression in English would be “John makes ends meet with chanchullos.” Chanchullo in Spanish-speaking countries has different meanings. In Spain chanchullo denotes illicit means to benefit oneself in situation such as gambling or sports, and it generally involves coordination with other people. In Bolivia, chanchullo is a piece of paper with information that can be used to cheat in an exam. In Venezuela and Chile, chanchullo is mainly used by the public to describe fraud carried out by public officials or institutions.

In Central America, chanchullo encompasses a variety of tricks used to gain an unfair advantage over others. Central American businesses have a bad reputation for swindling the public with impunity. This is the result of the colonial past when groups that controlled most of the wealth lacked competition and could mistreat consumers. Nowadays, the term chanchullo is still used to express the view that businesses cheat customers, smaller suppliers or distributors without repercussions. The term chanchullo can also be used to refer to the government cheating its constituents to benefit either private companies or government employees.

Chanchullo is different from chorizo since the latter is almost exclusively used in relation to the public sector, while chanchullo can be to cover both the public and private. An example of chanchullo in the private sector is a recent scandal of collusion to artificially maintain high fuel prices in Guatemala. The reason for the $0.63 higher fuel price when compared to neighbouring countries was not due to fuel production, tax structures or physical infrastructure in Guatemala; the reason for the price difference was chanchullo: the fuel distributors have been found colluding in the effort to maintain artificially high prices of fuel which had directly affected the population (Despacho 505 2019).

Another example of chanchullo is firms taking advantage of the lax laws regarding classified ads in El Salvador’s newspapers. While in El Salvador it is against the law to advertise false claims in media, some companies have used a loophole that does not restrict advertisements in the classified ads section of newspapers. Companies have been able to post ads for products such as miracle weight loss teas and opportunities with 50 percent monthly returns on investment (Vanguardia 2017). Such practices have adversely affected credibility of companies in general, as the public began to distrust businesses because of past abuses of trust and favour informal business transactions with face-to-face interaction and payments made in cash. However, informal trade starves the country of taxes needed to improve lives of its citizens because cash transactions are rarely reported to central authorities. High reliance on informal business transactions also makes it difficult for the central government to enforce business laws and regulations.

In Central American countries, one of the most common cases of chanchullo in the public sector is electoral fraud. The president of Honduras, Orlando Hernandez, has been accused of committing chanchullo in 2017 when he directed the country’s Supreme Court to allow him to run for re-election despite the constitutional ban on presidential re-elections. According to The Intercept, chanchullo of the 2017 Honduran elections was systematic; the election was stacked against the opposition candidate who had a slight edge over Hernandez when the polls closed. After interruptions in the electronic voting systems, the votes necessary for the incumbent to be re-elected began pouring in. While there was national and international outcry, chanchullo was accomplished and Hernandez remained president.

Accusations of electoral chanchullo were also present during the 2019 elections in Guatemala. In Quetzaltenango, Guatemala’s second-largest city, fifteen former mayoral candidates filed a suit against the electoral authorities, accusing the winner of chanchullo. The former candidates claimed that the electoral process contained irregularities such as inserting extra votes for the winning candidate into ballot boxes and distributing more than one ballot to certain voters. In general, chanchullo in electoral processes creates apathy among voters, which further erodes their already weak democracies.

Chanchullo is also found at the intersection of private and public sectors in Central America. For instance, the former Guatemalan president's son and brother's established business issued invoices for services that were never provided in order to recover the expenses for gifts to allies of their political party. Chanchullo in this case was the collusion with an established and reputable business to justify campaign expenses that were used as bribes to people who could benefit the political campaign of the soon-to-be president (Prensa Libre 2019).

Another illustration of chanchullo at the intersection of the public and private sectors is the case of Trecsa, an energy group controlled by a Colombian firm with operations in several countries. In Guatemala, Trecsa was planning to expand their operations and had bribed the government to get approval for their new project of providing electric energy to rural areas. The project was designated “nationally urgent” by the government, despite the fact that Guatemala produces 60 percent more energy than it consumes and exports the surplus (El Periodico 2019). In addition, to expand their operations, Trecsa would have to build infrastructure that would interfere with the ecological balance of the country. The declaration of national urgency was chanchullo benefitting the energy company and local politicians. This chanchullo not only eroded the government’s credibility, but also had wide environmental repercussions.

The wide spread of chanchullo has spurred a plethora of studies in Latin America (e.g., Cabieses-Donoso 2019; Gomez-Estrada 2016; Varon 2015). Because of wide definition and many uses, most studies analysing this practice have relied on qualitative approaches. This leaves unanswered the question of how detrimental this practice is for economies and the public in the countries where this practice is prevalent. A quantitative analysis of chanchullo will allow the public to fully grasp the consequences of this practice and to demand change.

Recommended Reading

Gorman, M. and Henson M.L. 2006. Manual of business spanish: A comprehensive language guide. Routledge: London and New York.

References

Cabiese-Donoso, 2019. ‘El chanchullo constitucional’, 18 December, https://www.alainet.org/es/articulo/203906

Despacho 505. 2019. ‘Chanchullo con los precios del combustible’, 31 March, http://despacho505.com/el-chanchullo-con-los-precios-del-combustible/

Diccionario Libre. 2020. ‘Chanchullo’, http://diccionariolibre.com/definicion/chanchullo.

El Periodico. 2019. ‘Trecsa, por mi casa no pasa’, 5 June, https://elperiodico.com.gt/lacolumna/2019/06/05/trecsa-por-mi-casa-no-pasa/

Gomez-Estrada. 2016. ‘Elite de Estado y prácticas políticas: Una aproximación al estudio de la corrupción en México, 1920-1934’, Estudios de Historia Moderna y Contemporánea de México, 52: 52-68.

Prensa Libre. 2019. ‘Absuelven al hijo y al hermano del presidente Jimmy Morales en caso Botín en el Registro de la Propiedad’, 19 August, https://www.prensalibre.com/guatemala/justicia/absuelven-a-hijo-y-hermano-de-presidente-jimmy-morales-en-caso-botin-en-el-registro-de-la-propiedad/

The Intercept. 2017. ‘The president of Honduras is deploying U.S.-trained forces against election protesters’, 3 December, https://theintercept.com/2017/12/03/the-president-of-honduras-is-deploying-u-s-trained-forces-against-election-protesters/

Vanguardia. 2017. ‘Estafas y empresas piramidales que afectan a los jovenes (parte 2)’, 27 February, https://www.vanguardiasv.net/index.php/nacionales/politica-economia/item/821-estafas-y-empresas-piramidales-que-acechan-a-los-jovenes-parte-ii

Varon, A.B. 2015. ‘Diccionario de la terminologia politica colombiana’, http://repository.ucatolica.edu.co:8080/jspui/bitstream/10983/3111/4/TESIS%20DOCUMENTO%20FINAL.pdf