On Thursday, February 4 we brought you the story of the twelve million dollar loan that Social Security Board has approved for Santander, an up and coming sugar mill in western Belize. Since we aired the story, it has been garnering some reaction from the public and has been discussed on various local shows. One particular show had the Central Bank Governor of Belize, Glenford Ysaguirre as their guest who spoke on Central Bank’s involvement in the loan facilities to Santander by the local banks. According to Ysaguirre, the syndicated loan could put the country’s financial services at risk should anything go awry with Santander. Because of that risk, Ysaguirre says that measures had to be put in place to mitigate the risks.
“When the proposal came to us and those banks saw because of the size of the facility they needed approval from the Central Bank and they came; we at the Central Bank in granting our approval sought to put in place certain guidelines to protect the exposure of the banking system knowing that it would be a syndicated loan, several banks lending to the same borrower; that this borrower becomes of systemic importance to the financial system and if that company is to have a problem it can have serious implications to the financials. So we sought to mitigate that by putting in place an arrangement, the condition of our approval to these banks was that there had to be an equal foreign investment from what would have been gotten from the domestic banks and they financed a part of it from outside. In the end there was a slight change in the ratio where the domestic portion was a little bit larger than the foreign portion of the loan and we also put in place measures to make sure that the disbarment of the foreign portion took place in tandem with the domestic so we weren’t going to be the one who were exposed and then the foreign money be delayed and then we end up with the issues. We wanted to make sure that the foreign investor has skin in the game.”
During The Morning Show aired today, businessman Lascelle Arnold had called in expressing further concerns where he spoke of the possible risks and the potential implications to Belize due to the loan to Santander. According to Arnold, SSB is going against the advice of the Central Bank on lending beyond the country’s threshold especially with the available risks.
“The reason why, the $6million dollars U.S. that they want to borrow which is 12 Million dollars Belize, the reason why they come to Social Security wanting to borrow that money [$6 million USD] knowing fully well that the Central Bank says Belize on a whole cannot lend more than they’ve lent already because of the risk. I would want to ask what your view on it is concerning the Social Security money lending to an institution where risk is involved now, where if you lose that kind of money that something will go wrong. The thing is that we don’t question the other banks. You are talking about de-risking, do we question the other outside banks that the company gets money from, how they stand with the de-risking issue and if there is an issue with that to which one of those banks, do they have a problem with de-risking because we don’t want a bank to be involved from outside that can contaminate the whole loan because then it becomes an issue with all the money from the different banks, which is our money, could contaminate that loan and then now it’s going to Social Security. I would like to hear your views on it because strictly from the Central Bank they cannot borrow any more money but yet they approved $12 million although they said that they are giving this week for the Belizean people to voice their opinions, their approval or disapproval on it.”
Love News contacted Ysaguirre, for some clarification on the matter. He did so by once again assuring the public that certain mitigation policies were effected in the event of unforeseen circumstances.
“I was asked on the show yesterday if that loan that SSB made to Santander required bank approval and the answer to that is no, it does not. We do not regulate or have any authority over the Social Security Board; I do not understand the comment that you said Mr. Arnold made. The company that the Social Security Board is lending to is actually incorporated locally so it’s not a foreign company; ownership might be foreign but the company is local .They asked me if the commercial banks have loaned to that company and the answer to that is that there is a syndicated loan and those loans require Central Bank’s approval and all the banks that participated in that syndicated loan they all applied and were given approval to make that loan.”
Ysaguirre added that he had no knowledge of SSB’s loan to Santander and that he can only hope that it was done with careful consideration.
“I wasn’t aware of the Social Security Board component and that was something that has indeed changed the formula and increased the domestic exposure so I would want to hope that those at Social Security Board who make that decision are looking at the wider financial stability implications of it and have put in place their measures to mitigate that.”
Last week we spoke with the Chairman of SSB, Doug Singh, who told Love News that the interest on this loan to Santander will prove beneficial for the Belizean people. Singh told us that Social Security was asked to participate in a syndicated loan put together by Santander, adding that Santander is investing or has invested 142 million US dollars in the establishment of a sugar factory and a number of acres of land in sugar in the west of Belize.