At that fiery House meeting of Friday, May 18, 2007, Opposition Leader Dean Barrow had put a question to the Prime Minister: “Will the Prime Minister list for the House any government guarantees under his administration in respect of private sector debts other than the UHS debt?”
To this, Musa’s response was that there was only one other – a guarantee for a $2.1 million loan at the Atlantic Bank for W & S Engineering Company Limited for the Belama Phase IV project. The company’s principal is Bill Lindo, a prominent member of Musa’s party – the People’s United Party.
The question had been raised in light of the secrecy surrounding the unlimited and open-ended guarantee for the debt of Universal Health Services, now tabbed at $33 million and counting. Like the wider Belizean population and members of the international financial community who have business ties with the Government of Belize, Barrow wanted to know how many more secret guarantees there were in the Government’s closet.
After admitting to the Bill Lindo guarantee, Musa, who is also the Minister of Finance, has made no more disclosures. A document leaked from Musa’s own Ministry, however, recently posted on freebelize.org, indicates that on the government’s books, there is much more than the Bill Lindo and the UHS guarantees.
The information indicates that guarantees for private enterprises, including privatized entities such as the Belize Electricity Limited (BEL) and the Port of Belize Limited, are in excess of $120 million.
Opposition Leader Barrow told Amandala that he is disappointed, but not surprised that the Prime Minister continues to lie on the formal occasions where a question is asked and he, Musa, solemnly states a position that he knows is not true.
Barrow noted that Musa was asked a formal question in the House of Representatives, for the record, and he read a reply, which he knew was untrue, into the record.
“I know that he says all leaders lie,” said Barrow, wondering if we, as a society, understand the gravity of the Prime Minister repeatedly saying things in the House that are not true.
“For a Prime Minister who does that once, much less repeatedly, there should be a chorus of public opinion saying you have to leave,” Barrow commented.
In reviewing the stock of government guarantees, we’ll begin with the ones that had already been revealed and discussed by our newspaper: $33 million for Universal Health Services Limited, $2.1 million for Bill Lindo’s W&S Engineering, and $24 million for enterprises of former PUP minister, Glenn D. Godfrey, with his related bank – Provident Bank and Trust and $6 million for another Godfrey company – Intelco – to pay for Government’s internal phone network.
Then there are those we have not previously discussed, and which had not been fully disclosed by the Government: $1 million for Northern Fishermen’s Cooperative Society Limited run by Robert “Bobby” Usher; $27.6 million for the Belize Electricity Limited – a privatized entity chaired by the same Bobby Usher, and $34.6 million for the privatized Port of Belize Limited whose majority shareholder is PUP insider – Luke Espat. (Bobby Usher is a nephew of the PUP’s Leader Emeritus.)
THE BEL GUARANTEES
The BEL loans (equivalent to US$13.8 million) were acquired from the Caribbean Development Bank, the European Investment Bank and the International Bank for Reconstruction and Development for the power II project, which involved, for example, the construction of a 115 kV interconnection transmission system running from the border with Mexico to Belize City, as well as infrastructure in San Pedro and Dangriga.
In the debt-offering memorandum for the super bond of US$565 million released to international creditors last year, the Government claimed that the loans were made before privatization.
The Government of Belize privatized BEL, selling off majority shares to Fortis Inc. in 1999. However, the public sector still has a stake in BEL, as Government still holds the golden share and the SSB owns 27% shareholding in the company. However, Fortis Inc. of Canada owns 70% and minority Belizean shareholders own about 3%.
THE PORT OF BELIZE GUARANTEES
The Government finalized the privatization of the Port of Belize in May 2002. While the offering memorandum for the super bond disclosed debt guarantees for Port of Belize Ltd., Government claimed that the liabilities were guaranteed before privatization. There were no details on the guarantee arrangement(s).
The tables posted on freebelize.org reveals, however, that the Government had sealed a buy-back guarantee with Port of Belize for US$16 million or BZ$32 million, and there was a further guarantee for US$1.3 million for a Caribbean Development Bank (CDB) loan. All in all, this brings the figure to BZ$34.6 million. When GOB announced the privatization of the Port in May 2002, it boasted that one of the benefits would be the trimming of Central Government’s debt, because the new owners of the Port would assume $34 million in debt. It turns out that GOB had committed itself to as much debt for Port Belize by the time it had closed the deal.
What is clear is that the US$16 million buy-back guarantee could not have been pre-privatization, but part and parcel of the whole privatization deal with the new owners.
To date, the Government has still not disclosed the details of the buy-back agreement it has with Luke Espat for the port. The only other time we heard of a buy-back agreement made at the time of a sale that involved GOB was when GOB repurchased Michael Ashcroft/Carlisle Holding shares in the Belize Telecommunications Limited (BTL). Under that agreement, BTL reverted to Ashcroft after the new owner, Jeff Prosser, failed to meet all payments for the shares.
Luke Espat is on record as holding 96% of the Port of Belize shares through Belize Ports Limited. When Amandala interviewed Espat at the time of the privatization, he had told us that he gave Government “acceptable financial instruments and a guaranteed Letter of Credit, secured by… [Ashcroft’s Belize Bank] for over US$17 million, and US$6 million in cash.” The sale was supposed to net GOB $40 million. [Emphasis ours]
THE GLENN GODFREY GUARANTEES
According to the freebelize.org document, guarantees total US$15.2 (or about BZ$30.4 million) for Glenn Godfrey-related companies. We’ve previously discussed the US$3 million balance with the International Bank of Miami that the Government continues to pay as lease payments for its Intelco network. There are also US$12.2 million for a set of put option agreements with Provident Bank and Trust.
As we had reported in May, the agreements, penned in 2001 and 2002, are for (1) US$3.7 million for the failed La Galleria Maya project; (2) US$6.5 million for the Internet in Schools Program and Government’s Wide Area telephone Network, under LGS Services Limited; and (3) US$1.8 million for Northern Property Management Limited, for a four-lane access road at the Belize-Mexico border to Galleria Maya.
Recall that the man whose signature appears on the agreements, then Minister of Budget Management Ralph Fonseca, had said via an official press release in May that the agreements were no longer valid; however, the Prime Minister had said weeks earlier that the figures for the debts were being disputed. Still, the full amounts guaranteed have continued to appear on GOB’s accounts as contingent liabilities—guaranteed debt that Government could end up paying.
THE UHS GUARANTEE
The UHS debt of $33 million is now listed as a direct liability after UHS defaulted on its loan, and the Prime Minister signed a deed of settlement and a loan note with the Belize Bank in March. To the $33 million, he also added a new $12 million loan for UHS.
The matter of Government taking over the UHS debt is still being disputed in the Supreme Court, and the judge hearing the matter has ordered full disclosure of the agreements, which should be made by the end of this week, Friday, June 15.
Note that what is now listed on Government’s books as a direct debt for Universal Health Services began as a guaranteed debt, just as the BEL, Port of Belize, Provident/Intelco, and other guarantees have the potential to become direct debts for the Government and people of Belize.
Government conceded to this possibility in the offering memorandum for the super bond by saying, “The guarantees represent obligations in respect of which the Government could, in the future, be required to make substantial payments.”
Apart from the UHS debt, another clear case of this having happened is the securitization program, under which the Government now reports having to pay $3.2 million annually until 2012 to make up for shortfalls in mortgage payments under this program.
BELIZE HIGHLY INDEBTED TO TAIWAN
Belize’s total debt, including contingent liabilities arising from Government guarantees, amount to a little over BZ$2 billion ($2,000,000,000). Roughly half of that has been restructured in the super bond, which matures in 2029. About a fifth is owed locally, mostly to holders of treasury bonds and notes, and to the Central Bank. Of the remaining 30%, about 14% is owed to Taiwan – the country to which Belize is most highly indebted. Next in line is Venezuela.
The majority of the balance is owed to multi-lateral agencies such as the Inter-American Development Bank and the Caribbean Development Bank.
Our commercial debt of a billion Belize dollars includes the $15 million Government still owes to BWS Finance Limited/Cascal BV, for the buy-back of 33 million BWS shares – a process that is still not complete. The Government began the repurchase in August 2005, using funds it had borrowed from Taiwan.