Just a couple months ago, the Chief Executive Officer of the Social Security Board (SSB), Mrs. Deborah Ruiz, explained that the SSB intended to subscribe to a $40 million domestic bond that the GOB planned to issue for the construction of two huge office buildings. She said the SSB had over a hundred million dollars that it needed to invest, because the money was earning a paltry one to two percent sitting in the banks.
Ever since a number of poor investments a couple decades ago, the SSB has been under the microscope. One recent SSB announcement that caused Belizean eyebrows to rise was a $7 million proposal to invest in Pharmacy Express. That one fell through after there was a public outcry. Just a little over a week ago, the SSB announced another project proposal, this one to invest $9 million in Belize Premium Spirits and Liquors Limited (BPSLL), a business that temperance movements would call a rum shop. SSB said the new company would be producing solely for the export market, primarily to Mexico.
The authorities might disagree, maybe even vehemently, but the SSB could be described as a Ponzi scheme. If the scheme were to shut down today, it couldn’t pay what it owed. The pensions of retired workers are subsidized by young employed workers who, to secure their pensions when they are old, will depend on a new batch of young, healthy workers paying into the scheme. The SSB is legitimate because of government, and it could go on forever, contingent also on the surplus funds not sitting in the banks earning one and two percent.
The GOB is all for SSB lending its money, not only because it needs to do so, but because the funds, if wisely invested, help to grow the economy. A country needs new businesses. The thriving businesses of today might not be viable tomorrow. Who can tell how much longer the present boom industry, Business Process Outsourcing (BPO – call centers) will keep churning out new jobs.
A 2019 BCCI report, based on data from the Statistical Institute of Belize, said that in 2002 our labor force was approximately 94,000, and that “as of April 2018, this figure has increased to more than 172,000 persons, representing an 83% increase over the last seventeen years (2002 to 2019).” As the population grows, more jobs are needed. Based on the simple average between 2002 and 2019, at least 4,500 new jobs have to be created each year.
Both the SSB CEO, Mrs. Ruiz, and Mr. Leo Vasquez, SSB’s General Manager of Finance & Investment Services, say BPSLL is a good thing. They say the company has the expertise to make the project a success, that the loan is well collateralized, and that the company would be paying 7.35% on the loan, which would earn the SSB $5 million over the 12-year loan period. The company says about a hundred new jobs will be created.
But a number of quarters — the Public Service Union (PSU); the main opposition party, the UDP, as usual; and the BPP (Belize Progressive Party) — have registered their concerns. The management of Travellers Liquors, which has been exporting liquor for 15 years, reportedly wrote to the SSB and told them that the loan is high risk.
The argument has been made that investors like BPSLL should seek financing from commercial banks, but getting start-up capital from such banks in Belize is daunting for entrepreneurs. The Development Finance Corporation (DFC) has been mentioned as an option for BPSLL to source funds. The DFC possesses project oversight expertise that SSB doesn’t have; however, their lending rates are substantially higher. The DFC is hesitant to invest in new businesses because their interest rates (minimum 9.75% for loans over $40,000) are not exactly friendly to startups. To finance a loan to BPSLL, the DFC would probably have to borrow from the SSB, at around 5%. Apparently SSB management decided to make the extra 2% plus themselves, for the same risk.
The SSB is advised to invest its surplus in safe, low-risk projects. There aren’t many blue chip BELs and BTLs to invest in. Some have suggested that investing in solar energy is a safe bet for SSB, but with international lenders eager to fund such projects, GoB might prefer the injection of foreign capital in our still struggling economy.
If the GoB goes to bat for the SSB on this one, it could argue that sitting money is not an option for an economy that is desperate to create jobs. And that if BPSLL starts distilling sugarcane juice, farmers will get another market for their produce.
Venezuela asked US to arbitrate dispute, but was unhappy with the result
Tensions have been rising in our region since Venezuela announced that on December 3 it will be holding a referendum in which it will be asking its people to support a takeover of the Essequibo region in Guyana. Huge petroleum deposits were found in the Essequibo in the past decade, which is no surprise to anyone, since Venezuela sits on the largest known such deposits in the world; and ever since Venezuela has been heating up its claim, it has been rejecting the option of taking the dispute to the ICJ.
CARICOM (Belize in particular, naturally) is hugely disappointed about Venezuela’s aggression. Venezuela’s Petro Caribe was a boon to many countries in our region, and CARICOM members tend to not be supportive of US pressure on Venezuela for that country’s introduction of policies that sought to address massive economic inequalities, since 1999 when Hugo Chavez was democratically elected president. Over the past year, however, CARICOM has been forced to issue a number of statements reaffirming its support of Guyana.
Venezuela’s claim over the Essequibo is based on ancient lines drawn in our hemisphere by Spain. The US’s Office of The Historian (OTH), at the website history.state.gov, says the dispute began in 1841. Great Britain had acquired Guyana (British Guiana) from the Netherlands in 1814, with no clear western boundary. In 1835, Robert Schomburgk, a surveyor commissioned by the British, completed a survey “that effectively claimed an additional 30,000 square miles for Guiana.” Venezuela disputed this border, called the Schomburgk Line. Great Britain later claimed an additional 33,000 square miles after gold was discovered in the area.
Venezuela, citing the Monroe Doctrine, appealed to the US for assistance. In 1895 the Americans demanded that “the British submit the boundary dispute to arbitration” to which the British responded “that the Monroe Doctrine had no validity as international law.” OTH says, “President Grover Cleveland asked Congress for authorization to appoint a boundary commission, proposing that the commission’s findings be enforced ‘by every means.’ Congress passed the measure unanimously and talk of war with Great Britain began to circulate in the U.S. press.”
The British acquiesced, and “Venezuela enthusiastically submitted to arbitration, certain that the commission would decide in its favor”, the OTH said. On October 3, 1899, the commission “directed that the border follow the Schomburgk Line”, but rejected “Great Britain’s increasingly extravagant claims.” Venezuela was disappointed, but it “quietly ratified the commission’s finding.”
It’s important to understand the era. In 1867 the US bought Alaska from Russia for $7.2 million and, according to OTH, in 1819 and 1821 Spain “ceded East Florida to the United States and renounced all claim to West Florida.” Because the Colombian government was not facilitating the construction of the Panama Canal, the US helped Panama to secede in 1903.