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Jun 2, 2015

Petrocaribe Used To Bail CPBL?

The Petrocaribe Fund and now the Petrocaribe Loans Act have been in the headlines for the controversy it is generating. The recent revelation that the funds were used for salaries in 2014 and 2015 and debt service commitments when the monies are slated for infrastructure and social programs has stirred an ant’s nest. There is another issue that is bubbling that has only now come to light. When the Social Security Board stepped in to bail the struggling citrus industry out of financial crisis last year, the proposed way forward seemingly did not include an infusion of Petrocaribe funds to rescue the beleaguered Citrus Products of Belize Limited, a private company.  To resolve the ongoing cash flow problems that CPBL was facing with its creditors, government advanced four million dollars to be used as payment to citrus growers.  Those monies would later be reimbursed, following an agreement with the Citrus Growers Association where its debt to S.S.B. was converted into equity in CPBL.  While there was much hoopla about the bailout during a press conference in February 2014, there was no mention that funds from the Petrocaribe trust would ultimately be used in the financial rescue.  The appropriate measures were said to have been taken when the motion was subsequently tabled before the House for approval.  But why was public funds used to assist a private entity? That’s what we asked the chairman of CPBL, who is also on the board of the S.S.B.

 

Doug Singh

Doug Singh, Chairman, CPBL

“There were some difficulties, continuing difficulties between the shareholders and there were threats of winding up the company, CPBL.  During that period processing was occurring and because of some of the problems in the industry First Caribbean Bank who was one of the primary lenders in the industry had decided that it was going to freeze its working capital operations that it had with the industry.  That created a significant shortfall in funds to pay the farmers for the oranges.  You would pay the farmers sixty-five percent of the value of an estimated value upfront and then you pay the rest as it is being sold or in certain payment schedule.  The funds were just not there.  This was when the government stepped in and the government was able to negotiate some form of a truce.  At that point in time Social Security also had an outstanding loan with Citrus Growers Association.  Negotiations were held with them where that loan was converted to shares, so Social Security [Board] is now a shareholder in CPBL.  This was in an effort to reduce losses because if CGA was unable to pay then you would never be able to collect and to a great extent the loan was unsecured.  That was a crop loan to help farmers deal with their crop inputs during the year on an ongoing basis.  At the time of the negotiations there was a dire need in the industry for cash to pay the farmers.  In an effort to bring everybody to the table the prime minister committed a four million dollar advance on the condition that we could agree to a Memorandum of Understanding that puts a new board in place that puts the company on the right path.  That was done and the government advanced four million dollars.  This had to be done to deal with the short term cash crunch and in the interim Social Security [Board] would negotiate with First Caribbean Bank on the buyout of their loan and we did so at a discount.  I think there was a five percent discount on the principal on the loan so Social Security [Board] made a little gain in that capacity.  That took a little while but as they say, “di horse di starve while di grass di grow.”  Farmers had to be advanced so the government advanced the funds to CPBL so CPBL could pay the farmers with the agreement that when Social Security arranged for the financing, Social Security would repay the government of Belize and that’s what was done.  So the four million dollars that the government advanced to CPBL was repaid by funds from Social Security.”

 

Isani Cayetano

“There wasn’t an initial mention in February of 2014 when this transition took place that Petrocaribe funds would have been used for that specific purpose, the four million dollars in question.”

 

Doug Singh

“I don’t know if it was mentioned or not that that was the source of the funds as far as the industry was concerned it was well needed funds.  Whether or not the government used that as its source I don’t know and I still don’t know.”

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