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Monetary reserves: They see possible unconstitutionality in the 2026 Budget
By Carlos Álvarez
Authorities at the Bank of Guatemala (Banguat) will determine what actions to take in response to possible unconstitutionalities in the Congressional approval.
The Bank of Guatemala (Banguat) warned that Article 85 of Decree 27-2025, the 2026 Budget Law, approved by Congress and related to the country’s financial participation in the Andean Development Corporation or Development Bank of Latin America and the Caribbean (CAF), could present flaws of unconstitutionality.
The Bank of Guatemala (Banguat) reported that the Monetary Board (JM) discussed the issue at its session on December 3 and concluded that the content of the article contravenes the current legal framework.
According to the entity, “the aforementioned article could have unconstitutional flaws because it contravenes article 133 of the Political Constitution of the Republic and the provisions of article 71 of the Organic Law of the Bank of Guatemala.”
Both articles expressly prohibit the central bank from granting credit to the Government, which, in the opinion of the members of the JM, could be violated by the way in which the financing for Guatemala’s participation in the CAF is proposed.
In response to this situation, “the technical bodies of the Bank of Guatemala (Banguat) and the Ministry of Public Finance (Minfin), in a coordinated manner, will be presenting to the Monetary Board (JM) a roadmap to determine the actions to be taken in light of the validity of article 85,” it was announced.
According to Banguat, “a solution must be sought that protects the country’s institutions,” given that “there is agreement between the Executive and Congress that Guatemala’s participation in the CAF could be beneficial.”
However, he emphasized that “the form provided for in article 85 of the approved budget is not the appropriate one.”
Soy502 consulted with the Ministry of Finance and the Social Communication unit explained that “although the budget project submitted by the Executive proposed payment with budget funds,” the Legislative branch modified the financing method.
He explained that “Congress approved the Banguat exchanging one dollar asset —International Monetary Reserves (RMI)— for another dollar asset —the shares of CAF, a regional development bank—.”
“The Congress of the Republic has the legislative power to authorize the Executive Branch and the Bank of Guatemala to take this action,” the Ministry of Finance pointed out.
He explained that article 85 of the approved 2026 budget empowers the Ministry of Finance to manage the use of RMI for the payment of shares with the Bank of Guatemala, but also mandates that the Monetary Board authorize the transaction, which allows for prior technical and legal opinions that give it viability.
“If the technical and legal opinions of the Bank of Guatemala (Banguat) indicate any unconstitutionality, the Executive Branch may request an opinion from the Constitutional Court on this article,” the ministry stated.
He noted that Banguat has acquired shares in the World Bank (WB), the Inter-American Development Bank (IDB), and the Central American Bank for Economic Integration (CABEI).
“It is an accounting matter; when the capital payment is made in cash to an international organization, it would not constitute an expense for Banguat, since a counterpart entry is recorded on the asset side that corresponds to the capital contribution to said international organization,” the Ministry of Finance stated.
He added that “it would have no effect on the level of its external assets, since the payment in dollars would only constitute a change in the composition of the assets recorded in its Balance Sheet.”
“There would be an increase in the Contributions to International Financial Organizations account, where the shares of the World Bank, IDB and CABEI are currently recorded, and a decrease in the Deposits Abroad account,” the ministry pointed out.
What the article says
Article 85 of Decree 27-2025, the General Budget of Income and Expenditures of the State for Fiscal Year 2026, specifies that “the Executive Branch, through the Ministry of Finance, is authorized to manage before the Bank of Guatemala, with prior authorization from the Monetary Board, the use of RMI for the payment corresponding to the ordinary capital type C of the CAF”
There are “2,817 registered shares of series C corresponding to the ordinary capital of CAF and the unit value of the shares is US$ 14,200 (Q 108,630)”.
Congress authorized the Bank of Guatemala (Banguat) to “honor the commitment of this provision” using funds from the International Monetary Rights (IMR).
2025 Dr. Richard M. Swier, LTC U.S. Army (Ret.). All rights reserved.
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