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  • Belize: Lights Dimming on Economic Freedom

    On June 20, the government of Belize expropriated the 70 percent ownership interest in the Belize Electric Company (BEL) held by the shareholder-owned, Canada-based energy giant Fortis. Belize Electric Company Limited (BECOL), a hydroelectric business that Fortis also owns, has not been expropriated—yet. Fortis has invested more than $400 million in Belize.

    BEL is insolvent and $27 million in debt. BEL officials blame the insolvency on the government of Prime Minister Dean Barrow, saying they were forced to sell electricity in Belize at rates lower than the cost to acquire the power from the state-owned CFE (Comision Federal de Electricidad) electric company in neighboring Mexico. As a result of the nationalization, Standard & Poor’s put Belizean sovereign bonds (which already hold junk status) on its downgrade watch list, “citing concerns about the Central American nation’s debt.”

    Belize is increasingly wracked by violent crime, while its high debt burden is a strain on public finance. The illegal drug trade and money laundering are entrenched problems. Prime Minister Barrow and his United Democratic Party (UDP) took office in February 2008 and have close relations with Venezuelan President Hugo Chavez, due in part to the many foreign aid petro-dollars Chavez has sent to Belize.

    The BEL takeover is the latest in a series of moves by the Barrow government to nationalize the commercial “crown jewels” of Belize. In August 2009, for example, the government took over the leading private telecommunications provider in Belize, and it has never paid the owners. Although Belize had been making some progress on its Index of Economic Freedom score, these recent actions by the government have definitely put that progress at risk.

    And where is the Obama Administration in all this? When the Barrow government took over the phone company, the Belizean opposition People’s United Party (PUP) branded the action an “expropriation,” but mealy-mouthed officials at Obama’s State Department could muster only the word “nationalization.” That calls to mind the Administration’s weak response to a similar power grab in neighboring Honduras when Chavez ally and ex-President Mel Zelaya tried to become president-for-life.

    How will Obama respond to this latest assault by a Chavista government on the market of a NAFTA partner country—through expropriation of a private company’s assets?

    Posted in International [slideshow_deploy]

    10 Responses to Belize: Lights Dimming on Economic Freedom

    1. Peter Jones says:

      Jim, clearly you know nothing of Belize or its economic realities, so let me enlighten you. Fortis, a 5.7B$ company who made profits year over year on its BEL investment essentially cooked it books using some creative accounting that backfired when the Supreme Court of Belize ruled that 36M in inflated cost of power numbers needed to be accounted for as income. Based on the mis-stated losses, Fortis selected to starve the company of funds, driving it into insolvency to try to force a rate increase on a country whose GDP is less than 1/6 of Fortis'. To exacerbate the situation, Fortis declares BEL's insolvency and gives the government 20 days to either find the money to bail them out, or bypass the regulatory and legal process and grant a rate increase higher than the current price of US 22c per KWh, or 5 times what rates are in the US or Canada.

      Belize is nowhere near a "Chavista" nation. The Prime Minister took drastic action to prevent his small poor nation from being plunged into blackout because of Fortis' greed. You really need to look more into Fortis' practice in Belize and also similar tactics with their subsidiary in Turks and Caicos. Do your homework before you try to continue to defend this action in the name of democracy.

    2. Lextor Macaramba says:

      Before you make up your mind regarding this situation, please read the book: "The last Flight of the Scarlet Macaw"It's about the Fortis Company and the Gov of Belize and the damming of one of the most pristine river valleys in Central America and the ultimate destruction of many species of flora and fauna including the Scarlet Macaw parrot all in the name of cheap energy. This company has little regard for the environment. It was done in Belize through backward government and shoddy environmental impact studies and a corrupt government. BEWARE!!!

    3. Rino says:

      The Prime Minister made a decision to protect the interest of the people… I am a Belizean and as small as Belize may be we are a people that have developed a strong love for our nation.
      Fortis and So many Companies that come to Belize tend to forget that Belize has laws that need to be respected… Would you go to your Friend's House and jump on his bed? No; because you understand that you would be disrespecting him.
      Belize will always be a great place to Invest… The nation is young and mistakes have been made… Privatizing national companies was a bad idea in the first place.
      BEL AND BTL were both owned by the Government.. IT is insane to think that one will keep the nation Crippled by leaving the only electricity company and the largest telecommunication company in the hands of Investors.
      Not that Investors are bad, it is insane to put electricity in the hands of people that may decide to remove their investment which will spell bad results for the nation.

    4. Katrina says:

      Dear Mr. Roberts, Peter Jones is correct, the Barrow administration cannot even remotely be considered a "Chavista" government.

      In trying to demonstrate that PM Barrow has close relations with Hugo Chavez, you linked to a 2008 Channel 5 article where Barrow said he hoped for future aid from Venezuela, but that never materialized.

      Truthfully, Venezuela hasn't given "many petro dollars" to Belize. Before Barrow took office, a donation of ten million dollars was sent by Venezuela to Belize, for the purpose of building housing for the poor. Former PM Musa used that Venezuelan gift for other purposes. In fact, the matter is still in litigation, Belizeans still haven't seen the money, and no houses were built.

      Ashcroft bank in dispute over $10m Belize fund for poor people http://news.maars.net/blog/2011/06/16/ashcroft-ba

      Venezuela hasn't done much since then, just a few penny-ante projects:

      In 2010 Venezuela gave some free eye exams, and eye surgeries for Belizeans: http://edition.channel5belize.com/archives/33216

      In 2010 Venezuela donated some food after we got hit by a hurricane:

      Gabriel Sanchez, Charge d’ Affairs, Venezuelan Embassy: “We’re just here to bring a donation from the Venezuelan Embassy. It’s just a symbolic one but we wanted to help Belizean people in this situation because of Hurricane Richard. So this a small donation of dry food and water that we would like to contribute to the Belizean people on behalf of the Bolivarian Government. We have over there fifty boxes of water, four boxes of tuna, four boxes of powdered milk, four boxes of sardines and sausage too. http://edition.channel5belize.com/archives/41763

      And in 2011 Venezuela donated 1,500 baby chickens: http://7newsbelize.com/sstory.php?nid=19043

      As you can see, we're not exactly ROLLING in "petro-dollars" from Chavez here! Some medical care, a few boxes of sardines and some baby chickens, that's about it.

    5. katrina says:

      Is it good business sense to double the credit guarantee for a company on the brink of insolvency? Because that's what BEL was demanding of the government, and Mr. Barrow didn't want to continue bailing out a company the government had no control over.

      If BEL fails to meet payments to CFE, Government is on the hook for $10 million for a letter of credit it had given to facilitate BEL’s purchase of power, the Prime Minister said. http://www.amandala.com.bz/index.php?id=11281

      You wrote that "BEL officials blame the insolvency on the government of Prime Minister Dean Barrow, saying they were forced to sell electricity in Belize at rates lower than the cost to acquire the power from the state-owned CFE electric company in neighboring Mexico" but nowhere is that stated in the article you linked to by 'Belizean' and in fact, it's a false assertion.

      Average residential rates computed into Belizean cents per kilowatt hour:

      Mexico: 0.12/kw
      Honduras: 0.18/kw
      Guatemala: 0.40/kw
      Costa Rica: 0.16 kw
      Nicaragua: 0.28/kw
      Belize: 0.44/kw (Above 200 kWh: $0.47 per kWh)

      As you can see, Belizeans already pay the highest electricity rates in Central America, every year BEL demanded further rate increases…. and FORTIS profited quite handsomely, because BEL is regulated by the PUC, but sister company BECOL's three dams are not regulated:

      Fortis Q4 Profit Up – 2/10/2011 – The increase was mainly due to improved performance at Canadian Regulated Electric Utilities and non-regulated hydroelectric generation operations in Belize… http://www.rttnews.com/Content/CanadianNews.aspx?…

    6. katrina says:

      Is it good business sense to double the credit guarantee for a company on the brink of insolvency? Because that's what BEL was demanding of the government, and Mr. Barrow didn't want to continue bailing out a company the government had no control over.

    7. margaritolambey says:

      please get the fact right before you write things about, my beautiful country belize.

    8. Belizean says:

      I agree with the post, Belizeans are far more in debt than they have ever been. The PM continue to put his family, friends and x-lovers into power position. He is still talking money from Ashcroft through Belize bank which means they are still friends. It is about time the people of Belize see that the PM is simply selling BTL to the government for Ashcroft, how much is your cut Mr.Barrow?

    9. Secure In Business says:

      I am a Canadian who knows FORTIS very well and have lived full time in Belize for 20 years and have invested in, created, manage and profit from a number of business'. I was scared under the the corruption of the previous PUP Government who put Belize into 2.8 BILLION DOLLARS of dept through corruption, mis management and immoral leadership. For the nest two generations, the very small population of Belize, approximately 300,000 of which less that half pay any type of taxes, will be paying off that debt. With almost 100 million per year in interest alone.. think what we could do with that money in education, hospitalization, care for our elderly, only to name a few uses for that money.

      Since the UDP came to power in 2008, ousting the PUP, in fact obliterating them due to almost total population revolt against the corruption of the 10 Year rule of the PUP, I feel much more secure as a business man in Belize.

      80 % of the information that Jim Roberts has presented is misrepresented or simply untrue to provide a curve to the story that fit the story he wanted to write. This is not the only publication I have seen this same article published in..

      Once again, as a businessman, I feel far more secure in Belize now, under the government of Dean Barrow than ever before under the decay of the PUP..

      Shame on Jim Roberts for simply cutting and pasting information provided by special interest publications to mis represent facts.. SHAME !!!!!!

    10. katrina says:

      Belizean, you may agree with the opinions expressed, but what about all the FACTS Roberts got wrong? You can't have it both ways, either Barrow is a capitalist despot raking in the dough, or he's a despicable Chavista, doing things for the peoples' benefit. Either Fortis was forced by the government to charge LESS than they were paying for power, or Fortis simply wasn't making the PROFIT they desired. (By the way, I don't like Barrow much either, but one should at least be accurate in criticisms, rather than simply knee-jerk condemnation.)

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