On June 22, 2020, eyebrows in Belize went up when we were informed that Caribbean Investment Holdings Ltd. (CIHL), the owner of the Belize Bank, had moved to acquire Scotiabank Belize, for $30.5 million. That deal had been out of the news for some months, until last week when 7News announced that it had been privy to reports that the parties had signed, or were about to sign, on the dotted line.
Commenting a few months ago on the possible transaction, which would give the Belize Bank control of nearly half of the banking sector in Belize, the Governor of the Central Bank, Ambassador Joy Grant, had said that they would ensure that all the safeguards were in place to protect the stability of our financial system and the value of the Belizean dollar, a clear indication that she saw nothing unfavourable about the acquisition.
The announcement wasn’t well received by all in Belize, and many, including the Belize Chamber of Commerce and Industry (BCCI), publicly expressed their concern about the merger. Among other things, the BCCI advised the government to introduce competition laws to prevent market dominance by any entity in any industry in the country, and advised that before such a merger was approved, our government should consider our financial stability and our ability to access and maintain correspondent banking relationships.
The then Prime Minister, Hon. Dean Barrow, didn’t express enthusiasm about the proposed deal, but the consensus was that with a general election on the horizon he wasn’t being entirely upfront as a matter of political expediency. Many believed PM Barrow was well apprised of and supportive of the acquisition because the present governor of the Central Bank was chosen by his government and his law firm has worked for the Belize Bank for decades.
In its newscast last week, 7News said “the Barrow Administration was opposed to the sale, and even as the Central Bank of Belize reviewed it, it became clear that PM Barrow wanted the decision left for the next government.”
Apart from the critical competition concerns over the prospect of one bank controlling so much of the banking sector, Belize’s other concerns about the acquisition are the effects that the merger would have on interest rates on loans and correspondent banking. Belizeans wouldn’t want to see interest rates in the construction industry go back to where they were ten years ago. Interest rates on loans for housing were in the double digits, until the National Bank started offering loans at 5.5%.
It is essential that our banks have correspondent banking relationships with commercial banks in the USA, because without that facility our big businesses and small entrepreneurs cannot do the money transfers and currency exchange to purchase the goods and equipment we need, and sell our products. At times these relationships have been at risk because the Americans have enacted stiff laws to stymie the drug trade and money laundering. We are on the route for the cocaine trade, and our involvement in the Sanctuary Bay Scandal, a scheme that bilked US citizens out of millions of dollars, hasn’t helped.
At critical moments Scotiabank Belize, which is headquartered in Toronto, Canada, has been our most secure conduit to the banking world out there.
We knew that this matter of the sale of Scotiabank Belize was pending because the bank had expressed its intention to quit its banking operations in Belize. Most Belizeans are not in favour of a deal with the Belize Bank, but after the last government’s carelessness with our financial resources, and being severely drained by the COVID-19 pandemic, we are not in a strong position. We are critically ill financially, and while the present government can’t just roll over and give us up, we know we cannot dictate as we could have, had we not fallen into such hard times.
If indeed Scotiabank Belize has fallen into or is about to fall into the hands of the Belize Bank, we have to hope that, in regards to the strength of our correspondent banking relationships in the US, there is not too great a loss, and we must expect that the Central Bank has put in the necessary rules and regulations governing the way the sector does business so that the acquisition doesn’t become a monstrous disaster.
Unrest in Guatemala
Belize is keenly interested in how well our neighbour to the west, Guatemala, is handling the COVID-19 pandemic, because that directly impacts us, and, of course, we want to know what they are going to present to the International Court of Justice on or before December 8, 2020.
In April, Guatemala, citing difficulties caused by the COVID-19 pandemic, asked the court for a 1-year extension to prepare its claim on our territory, and the court granted them a six-month extension after Belize suggested that a two-month extension should have been sufficient.
The Guatemalans have been handling the pandemic just as poorly as we have, and with less than a month to go before they are scheduled to present their case -– which we hope they drop -– they have another problem on their hands, this one political. Our neighbour’s political business is their internal matter, but we have to be aware of what is happening over there.
In January this year Guatemala installed a new president, Dr. Alejandro Giammattei, and a few days ago his second-in-line, Vice-President Guillermo Castillo, suggested that they both resign for the good of the country.
The news group, France 24, at the website france24.com, said that Castillo and Giammattei have at times been at odds over the handling of the pandemic, and this week tensions between the men escalated after Guatemala’s Congress, which is dominated by conservative pro-government parties, “approved an almost 13 billion dollar budget, the largest in the country’s history”, with most of the funds going to infrastructure tied to big business.
Sofia Menchu, writing for Reuters, said that on Saturday thousands of people took to the streets in Guatemala City, to protest a budget that “increased public debt while cutting funding for healthcare, education, human rights and the justice system…”