Social Security Board Proposes $9 Million Loan for New Rum Factory, Sparks Controversy

Social Security Board Proposes $9 Million Loan for New Rum Factory, Sparks Controversy

The Social Security Board has proposed to loan nine million dollars to a Belizean company to construct a new rum factory.  Last week, the SSB issued a public notice of the proposed twelve-year loan to Belize Premium Spirits & Liquors Industry. The company says the monies will go towards constructing a new distillery, purchasing equipment, and working capital. The investment is nothing out of the ordinary for the board, which is working to invest over 130 million dollars. But today, the proposal gained some controversy on social media, where some questioned whether the board was making a frivolous investment. The board’s CEO, Deborah Ruiz, responded, saying that the investment is sound and provided additional details on the terms and purpose of the loan. 

Deborah Ruiz, CEO, Social Security Board: “Earlier this year, I think it was around March 9th, that we received from Belize Premium Service Spirits and Liquors a request and their initial request was not considered. It was felt that they needed to make some variation to their proposal. So we have been back and forth with them over this past year and finally it passed to the investment committee for the sum of $9 million as he notice has indicated. We’re looking at financing the construction of a distillery, equipment and some minor working capital with two years moratorium on the principal. Basically what they’re looking to do is to build a distillery so that they can process some rum products both gold rum and coconut rum for the export market. It is not for local consumption as far as the proposal had indicated. And then later on they would top up their products with different variations of rum I imagine in terms of what will go to the export market. It’s for 12 years initially, and then we are having an interest rate of 7.35% on the total interest income that Social Security will earn is over $5 million over the period. So in terms of you know rather than having that money sitting at the bank this is an opportunity for us to invest. And in addition to that the customer will be creating employment we estimate over 104 new jobs coming out of the business. We do have collateral cover. We have acres of land that the company has put up. We have put up different personal guarantees. In addition, he is putting in his own money because as I had mentioned, he had made an initial request for a larger sum so that variance he has to put up and so we’re only putting this here in terms of the distillery and work equipment and of course working capital to get started for the distillery. But he has put up more than adequate collateral to cover more than the nine million. Right, so if I recall, it’s over 752 acres of land in addition to the personal assets and guarantees that we have provided.”

The owner of the new business, Waldir Cuello, is a master brewer, who worked for several years with Ceullo’s Distillery Limited. Given that the company is not operational yet, the board was asked to elaborate on the viability of the loan’s repayment. Here’s how Leo Vasquez, the board’s General Manager of Corporate Services, responded. 

Leo Vasquez, General Manager, Corporate Services Social Security Board: “Our coverage is 1.3 to the loan. In this case about 16 million is covering a $9 million loan request that’s gonna be spread over in tranches. It’s not a one-off, one $9 million outflow. It’s remember he’s constructing the distillery over a period of months. So that is really how it is. But there is sufficient collateral, as I was saying, this is not he didn’t just jump up overnight and decide to buy. He has put a lot of his money so there’s a lot of invested money and capital in this project. So when you travel, if you go north, you’ll see that is evident the amount landfill and construction to prep the project for the construction. So that is why we are comfortable strictly by numbers. This in terms of, it makes sense strictly by the numbers but it is for the export market. Everything is a risk, but that’s why when I preface my comments strictly by the numbers. So yes, it’s going to take a couple of months to construct. Now, when we looked at what will be produced and the export to places like Duffy and there’s a HP Global so he’s got his assurance of where he’s going to market that to. But production of the actual rum is really a drop in the bucket to what’s out there in the Mexico market. You’re talking $500 billion so $9 million is neither here nor there for that. But it’s, you know, it’s again strictly by the numbers given the cost, the margin, the sale, and where you can put it in those duty-free shops to start with is you’re talking like about what three thousand cases per month which is really nothing even compared to what the Travellers, the Cuellos Distillery,  the Old Masters do locally so it’s we wouldn’t say it’s speculative because we again even should this fail we’ve got the collateral coverage so there’ll be no loss to the fund but again strictly by the numbers we look at everything, remember 30 years this man experienced in the market. He knows how to do rum, to make rum. We’ve looked at where it’s going to export, what it’s going to do in the Cancun, the Tulum, all the spots where Dufry and all these markets are it just made sense.”

The loan has been approved by the SSB sub-investment committee and is now in the process of being finalized.

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