Notes From a Native Son – The Four Seasons ‘Investment’

Hal Austin

The government of Barbados, despite sound public advice, looks set to go ahead with the Bds$50m ‘investment’ in Four Seasons, the holiday project on the West Coast, which in time will become the biggest white elephant since independence. It is clear there is no business economic reason for the decision, as there is none, and the government’s decision to go ahead with pumping taxpayers’ money in to the project is political and not economic.

First, let us look at the only legitimate reasons for any such political intervention: first, job creation; second foreign currency earnings; and third, the need for top end tourist accommodation. Let us deal with the third reason first. Barbados needs further top class hotel accommodation like a hole in the head.

There are more than enough hotel beds available, which even at time of great demand, such as the Cricket World Cup, are still under used. During the CWC, hotels were only 70 per cent occupied. Even so, the government has a huge portfolio of hotels which it is at a lost as to what to do with it.

In the case of Four Seasons, over and above this obsessive desire for an international brand (the Hilton is international), it is unclear what its business plan is since it appears to change according to how the wind is blowing. There is no evidence as to how it plans to fill this void. What we do know is that in strict business terms, the business plan is flawed. First, it was meant to be a hotel/villa development. Then it appears as if the villa development was suspended as the executives approached government and other regional and international funding bodies for loans. This alone should raise a red flag. If the original business plan was based on a hotel/villa development, then what has happened, apart from the urgent need for further funds, to change their plans?

This has not been explained adequately to the public by Four Seasons, nor, even more worryingly, by the government. Then there is the issue of job creation. The government could have injected this stimulus in a much more creative way. Take the $120m and now this $50m, a total of $170m, along with the $50m spent on the Warrens roundabout development, all this could have been used to fund a Nelson Street and environs development, thereby providing decent homes for local people and turning the centre of our Capital in to a creative working hub.

The foreign currency argument, which seems to be the main purpose of the tourism sector, is not viable. Currency reserves are a hedge against shocks which has been made largely irrelevant through the new global financial architecture – even after the 2007/8 banking crisis. But our poor democratic culture means that government could go ahead with major capital investments without any kind of parliamentary debate.

The second flaw in the Four Seasons current business plan is that it does not appear as if the $50m government/NIS so-called investment (in reality a handout) has followed formal due diligence procedures. Does this mean that the investment will cover all development costs until completion and the hotel/villa begins operating commercially? If not, then it means that Four Seasons will more likely be back in the market trying to raise further funds.

Governance:

There is also the issue of governance. Four Seasons is a private project, or was meant to be, and as such how private investors spend their money is nothing to do with taxpayers, as long as they obey the law. However, once they approach government for support then they should be treated as a listed company, with all the bells and whistles.

There is a strong rumour, and it is no more than that, that the executive chairman of the project was the recipient of over US$4 in fees for his alleged involvement in the Bds$120m loan, which the project received in the early years of the Thompson administration. So far there has been no confirmation or denial of this claim. As this involves public money, there is a need to make this clear. Not doing so is a failure on the government’s part.

There are also other questions: if Mr Persaud is the executive chairman, what is his annual salary and what are his day to day responsibilities? It is unusual, to say the least, for a project such as this to have a fulltime, salaried chairman, which is what ‘executive’ means.

National Insurance Scheme:

It is my view that the national Insurance Scheme has always been badly managed. An insurance scheme’s primary responsibility is to provide retirement income for its beneficiaries. Its investment strategy, therefore, should be based on meeting its current commitments i.e. the already retired, and making competent investment arrangements to need the needs of deferred and active members and beneficiaries. Such a strategy has traditionally been based on fixed income, to meet those known commitments, based on demographics; equities, to grow future income; and cash, property and, maybe, alternative investments, such as hedge funds. Obviously speculative investments must be ruled out as there is too much of a risk to the scheme’s money; Four Seasons, as it presently is, is mere speculation.

Good portfolio construction is important at the best of times; and, at times such as these, with global negative volatility and market uncertainty, it is even more so. So, even on basic investment grounds, ignoring asset allocation principles, this so-called ‘investment’ is not a good one because it ignores market conditions. It is a waste of taxpayers’ money. Has there been any risk profiling? Good investors would want to see the worst case scenarios on the cash flow projections. What does this way? In fact, what does the re-drafted business plan say about these changes and cap-in-hand approaches for funding|?

What is also important is who was really behind this decision? The CEO of the NIS, the investment committee, the minister of finance, or did they just did a quick spin on a voodoo board and hoped for the best?

The issue, far and away above providing million-dollar villas for the super rich to own their little part of Barbados, is why is this incompetent government adding to the public sector deficit?

Public finances are in a urgent need of restructuring, but this is not the plan we all expect and hope for. Whatever the method, they have put crap in and got crap out. According to the Auditor General’s report, the NIS is still years behind with its financial reports. If this is still the case, do we not think this should be the first priority for the new chief executive?

Analysis and Conclusion:

The only way in which concerned taxpayers can fight back, apart from removing the government at the next general election, is by challenging this decision in court. Even if the high court decides against the challenge, it would present the Caribbean Court of Justice in its appellate role, with a real constitutional dilemma. In any case, it would clarify the extent of Executive powers over the parliament, the extent of its powers to intervene in statutory agency decision-making and the limits of judicial powers of intervention.

In the final analysis, this is a decision for Barbadian citizens. They can either sit on their hands and play silly party politics, or behave like grown ups and interrogate the government over this blatant act of irresponsibility.

The decision is theirs.

40 comments

  • I don’t think there is a person in tourism on Barbados that would not like to see a completed and viable Four Seasons Hotel.
    BUT (and its a BIG but), before the taxpayer is told just how much of their monies, including NIS funds were lost in the GEMS (Hotels and Resorts Ltd) disaster.
    It is very difficult to calculate just how much damage was done to our private sector hotel industry by the years of predatory pricing practised by GEMS and how many of the 32 hotels that have closed over the last twenty years
    did so as a result.
    Among the very many questions that are not being answered on exactly when ‘we’ the taxpayer can expect a result on our ‘investment’. Even it is successful during a global recession, how many years before it enters viability.
    Is it the very best use of funds?
    Would not a new world class conference facility at Needhams Point (Holborn) produce a greater return to the entire industry and taxpayer?
    The addition of a Four Seasons is not a guarantee of profitability, you only have to see their recently failed property in the Bahamas and the hundreds of million of Dollars lost there.

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  • So quick to push our hands in NIS Funds but we have to wait forever to be comforted by audited financials.

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  • @Hal

    Sandy Lane, is it having difficulty in attracting up end tourists? Is it profitbale in Barbados?

    How much money did the last administration invested in Gems and how much money was lost on the project over the period? was there any discussion with the public when GEMS was conceptualised and implemented? How many persons, members of the BLP had properties under Gems, and would you consider that a conflict of interest?

    Where did the money from Hilton hotel came from, and how much did it cost? Was it necessary to implode the old hotel?

    I await your answers to the above, before i ask more questions.

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  • Is this that can’t find money to pay Barrack, but can lend a private project $ bds $ 60 million? Did they not asked for a bds $ 50 million loan? Was it the Board of Directors who O.Ked the loan or the P.M and Min of Finance, who sqeezed the Board’s hand after their rejection? That entire Board should resign if they had any integrity

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  • @Blogger2012

    What is your point?

    Decisions of governments of the past where there was obvious lack of transparency and skullduggery should be continued by successive governments?

    Didn’t this government run a platform to depart from ways of the past especially as it relates to governance?

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  • @The Scout

    The money lent to Four Seasons whether you agree or not is termed an investment where a return on investment is anticipated.

    To pay Barack with NIS funds is to drop money in a deep hole.

    Do you understand the difference/ You can’t compare the two and this comment in no way is suggesting that Barrack should not be paid.

    On 13 January 2012 10:41, David wrote: > @Blogger2012 > > What is your point? > > Decisions of governments of the past where there was obvious lack of > transparency and skullduggery should be continued by successive > governments? > > Didn’t this government run a platform to depart from ways of the past > especially as it relates to governance? >

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  • @David

    my point is hal must do a comparative analysis how both govt used the nis funds, agruments must be fair and balance. That my point.

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  • Has anyone notice that project moved from 137 million us to 180 + million us. Have they just started to see that cost have gone thru the roof since they stopped and working on the site and the amount of remedial work that need to be done on it after sitting nearly 3 year on seafront.

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  • @Scout

    define governance

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  • As for the hilton the plant was aged thought the argument could be made the renovation to existing plant would have been better. So thats a moot argument there. GEMs, now there you can have arguments for weeks

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  • @Blogger2012

    A constructive discussion must be framed within the boundary of current realities.

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  • Anyone looked at inflation and potential increase in cost on building out the Four Seasons? Cement at the bulk level from Arawak Cement Company just increased by about 10% – certainly this will have an impact on budgeted construction cost of the project. Will cement to be used on the project be sourced from Arawak Cement Company or will it be sourced overseas? Will local labour be used? These are major factors in construction of a project of this size and nature. No doubt wages of local labour will come under pressure from the rising inflation and cause them to make demand for higher wages which also impacts on final construction cost of the Four Seasons project. Will Professor Avinash Persaud be going back to investors to raise more funding when this occurs?

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  • Barbados simply does not have the money to play in the big international tourism arena.Players must come in from outside.Gems was a reflection of the parochial mentality that figures we only the tourist we don’t any investor coming here telling us what to do.After all we have the product and we aren’t stupid. We now have graduates from our university who only know tourism having being inducted in the Barbados model.It amazes me that those in charge of tourism are not even bi-lingual.

    We do not have the wherewithal for this tourism business.We do not have the money, we do not have the expertise,we do not have the technology and now we surely do not have the plant.We should have followed Tom Adams lead with Casino hotel facilities.
    I am sure if Four Season was on of those international Casino hotel facilities it would have cruised to finish despite the Great Recession. It now would have been in operation for a few years contributing heavily to Government coffers.Fools we are to believe we can go forward without Casino hotel facilities.Copy and paste this url :http://en.wikipedia.org/wiki/Gambling_in_Macau in your browser and see the model that we should have adopted back in Tom Adams time.

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  • Build 20 villas. Sell them for $20million each. equals $400 million gross.
    NIS money should only be used to build the villas.

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  • @Professor Persaud

    Why are so quiet of late?

    There was a time you would be on the VOB talk show on a frequent basis. Now is the time to make yourself available to answer questions and make the management of the project transparent.

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  • @ David

    The man got his $60. Go public for what now?

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  • You should not build a hotel complex to sevice villa owners.

    Build the Villas first and sell them for profit.

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  • What I would like to know …should this whole project go “belly up”…if the good Prof. going help pay back the NIS money that poor blck persons like my mom put there?

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  • Hal Austin as usual – very one sided in his arguments – the same BLP crowd that caused the NIS to be years behind in its financials and caused this country hundreds of millions in wasted taxpayer dollars in GEMS is the same BLP crowd that will be coming to the electorate saying that they have all the answers. Therefore would Hal also concede that there is a high level of incompetence in the current BLP opposition?

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  • Sharon;

    Have you actually read what Hal Austin has written in his articles so far? His articles suggest that he has no love for Arthur or the BLP. He is as non-partisan as they get on this blog. Hasn’t the culture of NIS and other statutory institutions being well behind in their financials been standard in Barbados, spanning several administrations, B and D? It needs to be changed but your arguments seem to suggest that the BLP, out of office, can change it. They can’t, only the current administration can.

    Conceding that there is a high level of incompetence in the current BLP administration (as related to the current situation) is a dead political red herring that has nothing to do with Hal Austin’s thesis above.

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  • “Conceding that there is a high level of incompetence in the current BLP administration (as related to the current situation) is a dead political red herring that has nothing to do with Hal Austin’s thesis above.’

    Check it out…you meant…. Conceding that there is a high level of incompetence in the current DLP administration and not the BLP?

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  • Islandgal246. I agree that there would seem to be a very high level of incompetence in the current DLP administration that spans most ministries. However, the context of Sharon’s argument was that Hal Austin had apparently not satisfied her that he was even handed in dealing with the current NIS issue and that he needed to highlight some arguable BLP administration incompetence as being part and parcel of the current situation. That argument is tenuous at best. What Hal Austin appears to be arguing is firmly in the current administration’s court (they alone are responsible) and bringing the BLP into it would be of no relevance to the argument and be a totally political red herring. I have not read Hal Austin as being political in any way, just someone who wants policies to be put in train to get Barbados from the morass it is now in and then to keep us on an even keel thereafter. He has, in a previous post, if my memory serves me correctly, condemned Owen Arthur’s policies, in a time of plenty (as he saw it) as being partially responsible for the overall economic plight we are now in and suggested a strategy for correction.

    What the Sharon types on this blog are doing is trying to shoot down reasonable commentary on the altar of wrongheaded political expediency imho.

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  • Motorists will be paying slightly less for diesel and kerosene, but a bit more for gasoline in the coming days.
    Effective midnight, Sunday, January 15, the retail price of diesel and kerosene will decrease, in keeping with the cost of oil on the international market. As a consequence, diesel will now be retailed at $2.77 – a decrease of eight cents; while kerosene will cost $1.79 a litre, a saving of 11 cents. However, the price of gasoline will move from $3.07 to $3.09 per litre, an increase of a penny.
    Meanwhile, consumers will also have to pay more for liquefied petroleum gas (LPG). The price of the 100-pound cylinder will go up by $4.11 and will now be retailed at $200.83; while the 25-pound cylinder and the 20-pound cylinder will now cost $55.31 and $44.20; an increase of $1.84 and $1.53, respectively

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  • Inflation will continue to make people poorer ..

    In the old days when you put your money in the bank one expected that the bank would find areas where these monies would be placed to make the kind of return that would be of interest to those with a fixed deposit in mind. Nowadays Banks don’t give a shite as they have resorted to fees and it is now a hell of a lot cheaper to keep your own money in a safe somewhere in your basement.

    The National Insurance Scheme does not have the luxury of banks and the fixed deposits (that is the contributors monies) have to be placed somewhere and in an environment where there is very little on offer a 4S project at the very least offers hope of a return. The next best option of course would be to stop “forcing” people to contribute and let them find their own way …!

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  • Persaud pass’ me yesterday in a sleek BMW convertible. My God, talk about flaunting it. Again my issue with this economic model it rewards the administrators and consultants, the people who are very good at telling others “what to do”. These are the ones that can boast by far the greatest success… And it is these people that produce NOTHING … not even results …!

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  • The DLP in its infinite wisdom has deleted its blog. The following message now displays on the WordPress space:

    dlpbarbados.wordpress.com is no longer available.

    The authors have deleted this blog.

    The blog was used in the lead up to the last general election to put some ‘blow’ in the government of the day, hmmm.

    Opposition politics is a far cry from being in government they say.

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  • It is -14 C in Toronto.

    It would be a good time for the BTA to put an Ad on television.

    Canadians would like to escape the freezer.

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  • Let us hope the DLP blog is being redesigned. They can’t possibly think that a blog is not vital in getting their message to the public.

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  • @Hants the blog was deleted but you should note the DLP has a website.

    http://www.dlpbarbados.org/

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  • seem sinckler lied about who has put money in four season. who know what else he has lied about now. http://www.nationnews.com/index.php/articles/view/no-dominica-for-four-seasons/#16030

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  • @anthony

    Why would he lie about something that can be easily proved otherwise?

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  • But what a misleading headline from the Nation. Surprise, surprise!

    The body of the story translates into a not yet or no decision made on the DSS investment, but the ever lowering standards at the Nation plumb for the sensational as usual.

    I wonder what Harold thinks of his new Editor-in-Chief. I understand there has been a spike in defamation suits since Roxanne Gibbes left.

    On another note discussions in diplomatic circles have centered on the revocation of Minister Michael Lashley’s visa by the US Embassy. Heard any thing about this David?

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  • @Bajan to d Bone

    Have received a few emails about it but BU has noting yet to validate.

    The question is why would it be revoked if true.

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  • In the same way you chastise the nation you should also chastise the minister for saying other nis have agree to the investment. It seem everyone is on wait and see and budget it ever increasing.

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  • @anthony

    Not disagreeing with you just curious as to why Minister Sinckler would make such a boldfaced statement which can be easily disproved. Here is a press report which supports your position.

    http://dominicavibes.dm/news/dominica-to-invest-in-four-seasons-project

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  • I was one to disagree with funding this project but now I agree with
    Government for doing it. It is a loan they will get their money back government’s biggest error is not opening up to the man in the street. Those people who started the Four Seasons project and who squandered the money are no longer in charge . The project is under new owners who seem to be very reputable this is a whole new ball game and this time around many barbadians would be employed.

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  • When Barbados Underground decides to resume blogging on the Education System it is important for the public to know that teachers like other persons in other careers are not perfect. However, teaching is not seen by many as a profession. Medical doctors can strike or withold their services and nary a word about the health jeopardy of patients. Automatically, their right to strike is respected. Not so with teachers. Teachers are told to first discuss with their Principal any forseen or occurring problems, they are encouraged to write to the Principal if they are not satisfied with an outcome or seek clarification. The next option is to write to the Chief Education Officer. The procedures function as deterrence. First this letter must be sent to the Principal who is expected in good faith to send a copy of the said letter to the MOE. It is common to find teachers complaining about the length of time it takes to receive acknowledgement from the MOE. The letters are sometimes not found or lost in the ‘correspondence’ file tray. Little wonder that subsequent queries are met with the promise to “get back to you” after reviewing the particulars. Meanwhile, back at school, the Principal’s instructions must be carried out under duress and with the prosperct of further punitive acts to follow. This is the environment of tyranny, one of the more resilient bastions of autocracy where a Principal can become a law unto himself fullly cognisant of the adminitrative malaise and tedium attending grievance procedures across the relevant Ministries and departments.

    This is overlain by political interference of the state level and social network kind. The din is made worse with the promotion of an incompetent or ill-suited person to the position of Principal. Quite a number of current principals are well known by their peers as individuals who lacked basic classroom control, who were tardy in the delivery of their lessons and who disliked process etc. In their new positions they posture and bluster revealing an appalling lack of understanding of human resource management and/or awareness of student-centred learning approaches.

    Fortunately for Alexandra School, the students have representation and the voices of their influential parents will effect change. Some other schools lack a functioning PTA, are presided over by supine Principals, listless Boards of Management, and are left to languish in function, purpose and direction by the MOE. Of course the notional obligation of creating an environment conducive to learning is never met in these circumstances and the students suffer and succumb to all manner of moral depravity. The Alexandra School impasse will end. But spare a thought for those students trapped in poorly run schools whose dysfunction benumbs the MOE. We see their graduates in bangles, face screw, fists clench or lying in chalk. Their signature is sketched in the mindless and the lawless acts shocking Bim. Sir Grantley Adams’ name has never been so besmirched.

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  • Quoting Bajan to D Bone “discussions in diplomatic circles have centered on the revocation of Minister Michael Lashley’s visa by the US Embassy.”

    David can you find out from Michael whether or not his visa has been revoked. A simple “yes” or “no ” from Lashley would suffice.

    And if his visa has been revoked we want him to tell us why?

    Like

  • My partner and I stumbled over here by a different web address and thought I might check
    things out. I like what I see so now i’m following you.
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    Like

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