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Dr. DeLisle Worrell, Governor of the Central Bank
Dr. DeLisle Worrell, Governor of the Central Bank

Sometimes one has to wonder. The media and analysts have been mostly silent to explain reports two 10 million and one twenty five million savings bond issues have been fully subscribed within hours of being floated. The recent decision by the Central Bank of Barbados to remove the regulation to pay Barbadian a minimum savings rate BU suspects […]

has been the great influencer. It should be noted the Central Bank floated a 4.25% Treasury Note on June 1 also and unlike the enthusiastic updates being issued on the sale of the savings bonds, we have not had similar updates about the treasury note. Come on Governor Worrell, update please!

Almost overnight Barbadians who have been earning 2.5% and higher from as long as the BU household can remember are in shock with banks now paying between .5% to 1.5% on savings accounts. To be expected we have not seen the same rapid and significant reduction in lending rates.

Given the haste the Central Bank of Barbados has rolled out its PR blitz to promote the savings bonds, it is easy to conclude the ‘arrangement’ between the Central Bank and the commercial banks has been successfully executed. Hopefully the Central Bank and commercial banks will achieve a win win position: the central bank will be able to borrow on the domestic market at a cheap rate and the commercial bank will improve its revenue position by not paying interest on useless deposits. The 64k question is whether Barbadians are equally as confident to borrow money which is important to stimulating economic activity.

The ignorance of my people!

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147 responses to “Rush for Savings Bonds”

  1. David Avatar
    David

    All we get from your political yardfowls is party line BS.BU is aware of the role trolls play in social media but Barbadians are becoming aware. What we want to know is the rate the Treasure Note issued on June 1 is being purchased.

  2. ac Avatar
    ac

    Throughout the months and years the one (1) and only issue that was meaningful and a cry from the Blp was wanting to see money put in the pockets of the citizens, Needless to say that these bonds are set out to do that which the Blp had called on govt , However needless to say that the response from the people was overwhelming which seems to have caught the BLP antagonist clueless and by surprise and with the predictable knee jerk response/s of negativity.
    How can anyone appreciate their way of thinking when the Blp groupies constantly overrule and dispose of their own issues,

  3. David Avatar
    David

    We have a situation where the Central BAnk released a tourism number for quarter 1 which is different to the one used by the BTMI and the whole affair driven by PR tactics. Sensible people out here are asking why.

    Barbadians have been duped by the PR campaign to transfer deposits now earning .5% and 1% from commercial banks to savings bonds 5.5% return over 5 years. If government can be more disciplined in its spending maybe it will be worth the sleight of hand policy.

  4. Pachamama Avatar
    Pachamama

    @ AC

    Some of us are still persuaded when confronted with your heightened level of ignorance to try with you. However, it would appear you are beyond redemption.

    The issuance of bonds have nothing to do with putting money in anybody’s pocket but that of a broke government, in the short and medium terms. In fact the reverse is true. Bonds extract money from the members of the population who have excess disposable incomes. These are unlikely to be the ordinary yardfowls like you who always eat as much scratch grain as immediately available. Most likely this issuance was almost completely taken up by institutions – banks, insurance companies and credit unions – even before the real public was to even have a chance.

    This is an issue where a little consideration would have shown you that it is a matter where your political elites play musical chairs with the economic elites. It has nothing whatsoever to do with 99.9999% of Bajans.

    We hate to give up on any human being but AC you have already breached the outer limits of anything which could be reasonably considered human. We shame all of us as Bajans!

  5. David Avatar
    David

    @Pacha

    Barbadians who have purchased savings bonds will have to be careful to invest discretionary funds. If for any reason they have to redeem the bonds before maturity this is where expectations will be an issue because the 5.5% will be elusive.

  6. ac Avatar
    ac

    So Pachaman What are the purpose/s of people putting money in commercial institution.. and BTW when you figure out the meaning of “interest bearing” then you can schooled ac on finances, until then you political comment is of no interest to me,

  7. Adrian Loveridge Avatar
    Adrian Loveridge

    David,

    what I continue to find amazing is that IF accurate arrival figures are disclosed in media conferences then WHY cannot the Barbados Statistical Service post them. Still only January and February 2015 have been placed on the site and here we are in June.
    Industry observers would not have to speculate if the BSS was doing their job.

  8. Pachamama Avatar
    Pachamama

    @ David

    Why would any Bajan want to borrow? No sensible entrepreneur will borrow when the systemic risks are so high. There are little opportunities to, in those circumstances, export capital to other markets as capital seek rent. Government is able to only protect the few from the normal business cycle, ups and downs.

    When people see how the blue eye boys like Bizzy and Stewart can rest on the government purse, why would anybody want to take the risks that has been determine only a government could? Of course, we assume that capital will normally flow to worthy projects. In other words the markets are reading these actions by government as an admission that this is not the time to risk capital.

  9. Pachamama Avatar
    Pachamama

    @AC

    Please don’t make us say that you are worthy of death.

    You have succeeded in bringing more complications into the situation. Now we have to deal with the fractional reserve system. Meaning because somebody tells you that Bajans got a lot of money in the banks it does not necessarily mean ordinary folks. Banks lend to other banks, can borrow from the CB, can create up to 10 times deposits out of thin air and expand their own account, they may hold savings from the NIS and so forth.

    So when the ordinary person has a few dollars in a bank the operations of that institution to buy bonds or not have little to do with deposits. The depositor only gets the promised interest, nothing more. Certainly, depositors have no role in the investment decisions of banks.

  10. Artaxerxes Avatar
    Artaxerxes

    Pachamama June 12, 2015 at 6:25 AM #

    “The issuance of bonds have nothing to do with putting money in anybody’s pocket but that of a broke government, in the short and medium terms. In fact the reverse is true. Bonds extract money from the members of the population who have excess disposable incomes. These are unlikely to be the ordinary yardfowls like you who always eat as much scratch grain as immediately available. Most likely this issuance was almost completely taken up by institutions – banks, insurance companies and credit unions – even before the real public was to even have a chance.”

    Pachamama, you are absolutely correct.

    Governments running prolonged high deficits issue bonds to finance that deficit.

    But there is also another strategy that, under Barbados’ present economical situation, usually accompanies the issuance of bonds, which I suspect this administration would undertake.
    Note how close to the budget the bonds were issued. So, look out for a reduction of certain taxes in the budget.

    I will explain in another post.

    +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

    Fractured BLP June 12, 2015 at 6:02 AM #

    “It surprises few persons that you finally admit that ……”you cannot understand anything…” The epitome of an IMBECILE!”

    Yours is a VERY FEEBLE ATTEMPT in trying to retort to my ACCURATE DESCRIPTION of you. Furthermore, I will not degrade myself and enter into a matching of wits with you….. it would be an EASY victory for me.

  11. ac Avatar
    ac

    Pachaman .what are u saying here and how does your comment explore/ explain the bottom line which is the necessary attraction for the average person purchasing govt bonds.Any financial advisor worthy of merit would laugh and dismiss some of the assumptions /assertions levied here .

  12. Artaxerxes Avatar
    Artaxerxes

    Pachamama June 12, 2015 at 6:53 AM #

    “So when the ordinary person has a few dollars in a bank the operations of that institution to buy bonds or not have little to do with deposits. The depositor only gets the promised interest, nothing more. Certainly, depositors have no role in the investment decisions of banks.”

    Once again Pachamama, I have to agree with you.

    Bear in mind that I am not at all against the government for issuing bonds, because, under the circumstances, it is perhaps the only path they can take at this time. However, I’m against the spin the DLP yard-fowls are trying to place on this issue and the misinformation they are presenting to this forum.

  13. Pachamama Avatar
    Pachamama

    @AC

    This writer happens to be a ‘financial advisor’ to individuals, businesses and government, licensed in several jurisdictions for more than two decades and holding the highest global designations. Do you mean us too!

    Why? Because our basic statements of fact are the opposite of what the yardies would like to believe?

  14. Pachamama Avatar
    Pachamama

    @ AC

    We consider that a conjoining between you and Bushie will deliver some rationality to you. Other things too, but rationality first and foremost. LOL

  15. David Avatar
    David

    @Pacha

    You said it!

    There is inherent risk associated with everything we do as human beings.

    There is nothing wrong with borrowing at the right price if the business model being operated will generate the return.

  16. David Avatar
    David

    The following comment by the Governor of the Central Bank is interesting when evaluated against the current approach of aggressively issuing savings bonds.

     

    No need for alarm

    Central Bank Governor not losing any sleep over Barbados’ debt to GDP ratio

    Added by Barbados Today on June 12, 2015.

    Saved under Economy, Local News

    Central Bank Governor Dr Delisle Worrell has acknowledged that Barbados’ debt is too high, but suggests he will not be losing any sleep over the country’s debt to GDP

    ratio, which is said to be in the region of 100 per cent.

    Dr DeLisle Worrell

    Dr DeLisle Worrell

    “The debt to GDP ratios of all the major industrialized countries are in the region of 100 per cent or thereabout. The best of them are 80/90 per cent, so the notion that it matters if we get to a debt to GDP ratio of 60 per cent is irrelevant,” argued Dr Worrell, during the recent launch of the new economic text entitled, Fiscal Sustainability And Debt In Small Open Economies:

    An Application To The Caribbean.

    The Government’s leading economist further pointed out that Japan had the highest debt to GDP ratio in the world, adding that, “if my memory serves me correct, Japan is number three in the human development index”.

    He also noted that Iceland, with a debt to GDP ratio in excess of 130, was “number 13 in the world”, while “Greece that has all these problems and so, is above Barbados in the development ranking.

    “So the notion that it will help us to grow to get to [the] 60 per cent [average rate of GDP] is unwarranted and unnecessary and it not part of our objectives,” the Governor said.

    He was at the time responding to a question posed by economist Winston Moore of the Department of Economics at the University of the West Indies who used the opportunity provided by the book launch to ask about the impact of debt on a country’s growth.

    The Governor responded saying there was no research which establishes “a reliable link between debt levels and growth” even though he said it had been taken as gospel by commentators that such a link exists.

    “It was absolutely without foundation,” Worrell stressed.

    The Governor, who also acknowledged that other Caribbean countries were grappling with high debt, also warned of the need to tread cautiously with debt restructuring.

    In fact, Worrell said “ you really have to think twice, three times and four times before you go that route”, explaining that there was a “prohibitively high cost” associated with debt restructuring, which he said was similar to the cost of individuals or firms declaring bankruptcy.

    “If you are declaring bankruptcy, it means, your credit is shot. From there on, you have to operate on cash. Very similarly with countries, if you restructure your debt in ways that your creditors are uncomfortable with, then they are likely to shy away from you for the future . . . so you have to think for the future, as to whether, the cost of doing things to allow you to pay the debt are outweighed by the costs that will not allow you to go back into the market in the future.”

    He said that countries also needed to be careful about debt management strategies, while acknowledging that there was a temptation to go for solutions other than through market intervention.

    However, he said Government remained focused on “sensible policies” that would allow Barbados to gradually work down Barbados’ debt.

    In response to questions raised by Government Senator Darcy Boyce about the role of the Central Bank in cases where the commercial banks are not funding the Government’s deficit, the Governor said there was no problem so long as there is no pressure on the country’s foreign exchange reserves.

    He noted that last year the Central Bank was able to accommodate the Government with funds placed in the Central Bank by the commercial bank themselves; therefore no undue pressure was placed on the system.

    “There is only a problem if, as happened in the previous year, the Central Bank has to accommodate over and beyond the funds that are returned to it in a sense from the commercial banks,” Worrell said.

    Source: (KK)

  17. Ping Pong Avatar
    Ping Pong

    Is ” a Zimbabwe” our future prospects?

    http://www.bbc.com/news/world-africa-33105400

  18. islandgal246 Avatar
    islandgal246

    Now tell me why people would rush to buy these bonds issued by this Incompetent government? As many have stated before when the con artists at CLICO offer of higher returns than the commercial banks and the Government of the day didn’t say anything to dissuade its citizens from investing in this PONZI scheme. Now this present government doesn’t see anything wrong with what the head of CLICO did, can’t see what anything wrong with what the Speaker of the house did, has flaunted the high court’s ruling on paying Al Barrack and continue to lie to the Barbados public about everything they do. Now tell me again why I should purchase these Government Bonds? Do you all really think that Bajans will rush to purchase these bonds? Think again folks. Fools go where angels fear to tread! Another Ponzi scheme like CLICO, Alan Stanford, Bernie Madoff etc.

  19. Pachamama Avatar
    Pachamama

    @ David

    Yes!

    Our argument is than when this government gives sovereign guarantees or other facilities to people like Bizzy and Butch Stewart it amounts to an admission that the only investment worthy are those supported by, or guaranteed by, the people of Barbados.

    Government bonds have these same characteristics so it should not be surprising that capital will gravitate towards them. Indeed, they are no different, structurally, than the deals Bizzy and Stewart received. Of course, there are galloping downsides to the generalization of these measures.

    Under those circumstances why would private capital want to enter the markets? To prove the government wrong! That’s never been the behaviour of capital,

  20. David Avatar
    David

    Sorry Pacha not grasping your point. When Bizzy et al are given sovereign guarantees it usually means they have to invest little in the venture, they risk small personal exposure. In the case of the savings bonds ordinary Bajans have more to lose.

  21. Bush Tea Avatar
    Bush Tea

    This man has lost it….
    Any leader who ‘loses no sleep’ over a large and growing national indebtedness to strangers is either a raving idiot, or having delusions caused by medical circumstances.
    ….but when we add this to his interpretation of the management of currency exchange rates the evidence seems to be pointing to the former condition.

    Talking shiite about ‘human development index’ …which is a measure of what white people have established as ‘desirable living conditions’. This is all very well for societies that have had centuries of UNLIMITED exploitation of resources from Africa, Asia and the Caribbean….. But for relatively recent emerging countries like Barbados to allow themselves to be measured by these SAME developmental standards is IDIOTIC, MYOPIC and downright asinine…..

    Shiite man….have we no brains?

    Our current mission MUST be about enfranchisement – financial and social of course, BUT EVEN MORE IMPORTANTLY, spiritual enfranchisement – OF THE MIND.

    The ONLY way we can meet these white people’s standards is by spending money that we DO NOT HAVE….ie borrowing upon borrowing upon borrowing…

    …and any IDIOT knows that when you borrow money to “look good”, you are taking enfranchisement in the WRONG direction.

    Why don’t someone put this idiot out of his misery and let him go home and play with his toy cars nuh…? How old is he anyway….?? …90?

    lotta shiite….

  22. David Avatar
    David

    @Bush Tea

    You forgot the part about when Barbados was proud to be a small developing state other countries tried to model against us. We have become so immersed in mediocrity, we have no problem benchmarking against countries outside of our peer group and or others unworthy of comparison for other reasons. Why cant we set our bar?

  23. Bush Tea Avatar
    Bush Tea

    @ David
    Pacha’s point is that rather than encourage citizens to TAKE THEIR OWN money and invest in productive ventures, they have created an atmosphere where all investments are channelled through Government – and given GUARANTEES that are essentially backed by taxpayers.
    If Bizzy, “Butch the Paradise pisser”, Maloney etc are given such RISK FREE deals why the hell would someone else with a few dollars then undertake the risk of productive enterprise? …so the banks full of IDLE cash …for which the JA’s are now offering the same guarantees that they offer Bizzy et al

    Remember Lowdown Hoad invested in goat milk and the damn government tried their best to put him out of business?
    Remember B’s Recycling?

    These people are IDIOTS ..who have been imposed on us in response to our sinful ways and our acceptance of institutionalised shiite – such as CLICO, crooks in high places, kickbacks etc.

  24. David Avatar
    David

    @Bush Tea

    Understood, let us pursue a David Ellis a while longer : if Bajans have demonstrated through many years they are risk averse what is wrong with government attempting to access the dormant monies in the public good?

  25. Pachamama Avatar
    Pachamama

    @ David

    Yes, Bajan have all to lose, not just more!

    In these deals no private investor, generally, has anything to lose, but everything to gain. As you will see on a re-examination of the two deals under consideration.

    What everybody counts on is that Barbados will always be here, and that government can always finds ways to tax, or impose other levies, on the population, even the unborn. There will be no end to this deflationary debt spiral, except eventual collapse.

  26. Pachamama Avatar
    Pachamama

    @ Bushie

    You are a scholar and a gentlemen!

    But yuh must go and give AC the little thing. LOL

  27. Pachamama Avatar
    Pachamama

    David
    Bushie

    It is the perfect business model. ALL the risks are held by government (the people of Barbados) but none of the profits. All the profits belong to the titular ‘investor’.

  28. De Ingrunt Word Avatar
    De Ingrunt Word

    David re your “if Bajans have demonstrated through many years they are risk averse what is wrong with government attempting to access the dormant monies in the public good?”

    I wish only Bajans were scared of risking money on investments that were not 100% guaranteed.

    I am not grasping the point of Pacha’s position that “when this government gives sovereign guarantees … it amounts to an admission that the only investment worthy are those supported by…the people of Barbados” …

    or Bushies’ companion argument that ” rather than encourage citizens to TAKE THEIR OWN money and invest in productive ventures, they have created an atmosphere … and given GUARANTEES that are essentially backed by taxpayers.”

    These are two very broad generalizations that rightly give a harsh critique of government’s marriage with private enterprise on the projects described but to compare those types of very large scale one in a 1000 projects to the day to day hurly-burly of the country’s business investment is not grounded in reason. In which country the size of Barbados would the waste management programs re Bizzy not require heavy government subsidies in some form?

    I am not agreeing with what the government did but simply asking a practical non-political question. How could something like that be facilitated unless the gov’t agreed to long term tax holidays, subsidies re land development/facility construction; waiver of some strict environmental standards; concessions on port charges and movement of waste to/from island or as they did on one project sign a ridiculous contract that guarantees an (un)-sustainable level of waste – thus guaranting income to the investor.

    Just like the de-sal plant project! Untenable sovereign guarantee indeed,

    Criticize the corruptness of the negotiations but certainly the economics surrounding the investment are not in the least unexpected for national scale projects of that type and certainly can’t be compared to a local investment in, for example, Burger King by the same Bizzy.

    The two things have nothing in common re investment scope – well, other than money of course.

    Would we compare the US gov’t concessions or economic decisions on a national size project like a nuclear power plant where they are negotiating with a select few companies that can even bid to do the work, with investments in their regular sale of bonds?

    In Barbados our size does magnify Bizzy’ involvement in eva ting but if one can separate the incestuous relationships from the debate how are our major national projects different to those of other countries (yes,yes, with corruption and all)

  29. Pachamama Avatar
    Pachamama

    @ David & Bushie

    If we could take this argument to its logical conclusion, and given all the circumstances previous discussed, why can’t the people of Barbados or the credit union movement own these enterprises, since we are assuming ALL the risk and NONE of the direct rewards. Why?

    This is the point we have been trying to argue for a decade now. Instead, this government and the one before it is content to wander into a deflationary spiral that will destroy the people on the altar of business interests. Its tantamount to a form of modern day slavery, or at least debt peonage.

    This is why we are expecting some orders, soon, for the guillotines we have in stock!

  30. David Avatar
    David

    @Pacha

    Of course ‘others’ should be able to consumate similar deals, we are all ears why this is now not the case. We have a free market system we are told.

  31. Pachamama Avatar
    Pachamama

    @ D Ingrunt

    We have previously commented that you are worth of your monitor, even name!

    That you could write all that and miss the central point about what a SG means would tell us about the mind at work.

    In other words, we are arguing that an SG contorts market conditions by insuring certain players against all risks, especially in a small open economy.

    Those contortions are likely to limited investments, whatever the scale or scope, which have a normal risk profile.

    This argument goes beyond the fiscal incentives which could be helpful to all qualifying businesses and should not be confused with them. Though both Bizzy and Stewart are claiming the two.

    An SG means that an enterprise could walk away, at any time, and leave the government to deal with the funder who accepted the SG as collateral. There is no skin in the game.

    Lastly, we are dealing with a set of people who have for decades made their money off the backs of Bajans, should this go on forever? And why are we to support projects which cannot stand on their own? And if there is an overriding social imperative, since we the people are taking all the risks, why not all the rewards as well?

  32. David Avatar
    David

    @Pacha

    In today’s context what is the weight of a SG anyhow. Those days are gone where commercial houses will accept SG. What this government has been doing a la SBRC and Ionics is to guarantee business. Such a commitment falls outside the definition of SG.

  33. Pachamama Avatar
    Pachamama

    @ David

    We happen to have some deep knowledge about this.

    We can give you any number of players, most not well known, including foundations, that would fund any SG from nearly any country, regardless of its credit ratings etc.

    Se how these White boys are ahead of the pack.

  34. Bush Tea Avatar
    Bush Tea

    @ David
    if Bajans have demonstrated through many years they are risk averse what is wrong with government attempting to access the dormant monies in the public good?
    ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
    …the FACT that governments have demonstrated through many years that they are not bribe-averse and that the ONLY beneficiaries of government projects are the descendants of the old Planter class who openly pay bribes to political parties;…the new class of Bajans of Asian descent – whose modus operandi is bribe based; the politicians themselves (who are attracted to politics for THIS VERY perk); …and of course the mothers of some specially retarded politicians.

    Look back at BU archives and see how long Bushie has been singing the praises of Credit Unions and the PHENOMENAL successes demonstrated since the 1980s…..and their potential to revolutionise Bajan attitudes to investments….

    ….but of course the politicians put a halt to that scheme when they tried to infiltrate the movement with their thievery and found themselves at the wrong end of Caswell’s stick…
    They have therefore HANDICAPPED the cooperative movement to facilitate their fetish….and branded Caswell as a rebel.
    …find out why many ‘successful’ politicians are persona non gratia in the movement… 🙂

    @ Pacha
    Bushie….You are a scholar and a gentlemen!
    But yuh must go and give AC the little thing. LOL
    ++++++++++++++++++++++++++++++++++++++++
    “LITTLE”…..?
    You looking to encourage Bushie to commit murder now…?
    ha ha ha

    @ Dee word
    “….How could something like that be facilitated unless the gov’t agreed to long term tax holidays, subsidies…..”
    ++++++++++++++++++++++
    Nothing WRONG with long term tax holidays, subsidies etc…. But ENFRANCHISEMENT is about giving these to PRODUCTIVE citizens who are prepared to risk their capital and work hard as shiite to achieve success….like HOAD and the Credit Unions….
    “ANTI -enfranchisement” is about giving these perks to the same old plantation types who feel that the country OWES them a successful life because they are willing to pay bribes and come on TV crying and talking shiite….

    Why do YOU think the benefits to Credit Unions members (over 100,000 ordinary Bajans) were removed…..?
    Seriously….!!

  35. Pachamama Avatar
    Pachamama

    David

    And there is no limit.

    Remember we are talking about debt peonage.

    Its good business to be able to burden your children with unrepayable debt or obligations.

  36. Artaxerxes Avatar
    Artaxerxes

    Pachamama June 12, 2015 at 10:53 AM #

    “In other words, we are arguing that an SG contorts market conditions by insuring certain players against all risks, especially in a small open economy.
    Those contortions are likely to limited investments, whatever the scale or scope, which have a normal risk profile.
    This argument goes beyond the fiscal incentives which could be helpful to all qualifying businesses and should not be confused with them. Though both Bizzy and Stewart are claiming the two.”

    Once again, I have to agree with your comments, Pachamama. I could learn a thing or two from you.

    Bushie has also been raising a similar point as it relates to the Bizzy Williams’ waste disposal plant and the attempt by the government to tax ordinary Barbadians to facilitate repayment on his investment. Essentially, he is protected against risks and competition, because he is guaranteed income, through the government, by the way of taxes. It is interesting to note that Williams used the 20 year payment guaranteed by the government to access loan financing.

    On the other hand, Stewart is being allowed to operate in a tax free environment, whereby his capital and current assets are exempt from direct and indirect taxation. However, his local employees have to pay all the relevant taxes, the banks have significantly lowered the interest rates on their savings, and since the government has introduce a tax on the assets of financial institutions, they are liable to receive less interest on their credit union savings.

    Another example is the “Adopt a Mile” project, which the government has “given” to Maloney. Since the Beautify Barbados and Drainage Unit workers were retrenched, the government could have introduced a model similar to that of UCAL, and subcontracted this work to those former workers.

    UCAL must also be considered in the scenario. The Transport Board has been shifting away from UCAL and sending the buses to certain business entities. It must be noted that UCAL employees, who are ordinary working class Barbadians, are shareholders of UCAL.

  37. Pachamama Avatar
    Pachamama

    @ Artaxerxes

    You are correct. And these arguments transcend both political parties. They are arguments supportive of the people of Barbados, not corporate interests, or political expediency.

  38. Due Diligence Avatar
    Due Diligence

    @De Ingrunt Word June 12, 2015 at 10:20 AM #

    “I am not grasping the point of Pacha’s position that “when this government gives sovereign guarantees … it amounts to an admission that the only investment worthy are those supported by…the people of Barbados” …

    or Bushies’ companion argument that ” rather than encourage citizens to TAKE THEIR OWN money and invest in productive ventures, they have created an atmosphere … and given GUARANTEES that are essentially backed by taxpayers.”

    Unlike Pachamama, DD is not a ‘financial advisor’ to individuals, businesses and government, licensed in several jurisdictions for more than two decades and holding the highest global designations”,

    But, he does have some business experience, so will try to help you out with a hypothetical example of sovereign guarantees that amount to an admission that the only investment worthy are those supported by…the people of Barbados”

    Please bear with me.

    Suppose a group of local investors have an established conglomerate of businesses of many years standing.

    The local investors sell their businesses, including the operation of certain hospitality/tourism properties, to a foreign investor – say from Trinidad.

    Following an assessment of the financial viability of the hospitality/tourism properties, the foreign (Trinidad) investor decides to exit that business.

    After selling one of the three properties to another foreign (US) investor, the Trinidad investor is unable to sell the other two properties, and shuts them down.

    Not wanting the properties to remain dormant, the sovereign state (the taxpayer) purchases the two closed properties, so that it can seek out another foreign investor to operate the two closed properties.

    When the sovereign cannot convince potential investors that the two closed properties are viable productive ventures, it decides to offer sovereign guarantees to induce another foreign investor – say from Jamaica – to acquire the properties.

    The Jamaican investor, being a shrewd and successful operator of similar properties in other regional jurisdictions, negotiates a deal under which the sovereign guarantees the Jamaican investor that it will not have to pay duties, taxes and similar normal costs of doing the business of operating the two properties, for 40 years.

    As a cautious entrepreneur – the Jamaican investor – decides to manage its risk; and renovates the smaller of the two properties, and will operate that property to determine its viability before redeveloping of the larger property. This gives the Jamaican investor the opportunity to assess whether it will go forward with committing any of its own resources to redeveloping the larger property.

    To DD, this hypothetical deal, made possible by a sovereign guarantee of 40 years of concessions amounts to an admission that the only investment worthy are those supported by…the people of Barbados” …

    Indeed, it is probably even better than buying 5 year government bonds.

    If the sovereign defaults before the bonds mature, the investors will take a hair cut; but the Jamaican investor has a sovereign guarantee that it will not have to pay duties taxes, etc for 40 years.

  39. Colonel Buggy Avatar
    Colonel Buggy

    One wonders how many Civil Servants and Ministers, Permanent Secretaries etc, pass this location, maybe twice daily, and have not uttered a word. Are we now a nation of stuartees, where we see things and keep our mouths shut. Hope that those government bonds do not end up like this.

    http://i.imgur.com/KvpIdur.jpg?1

  40. Colonel Buggy Avatar
    Colonel Buggy

    We can do as we like.
    http://i.imgur.com/7bQ7P4s.jpg?1

  41. De Ingrunt Word Avatar
    De Ingrunt Word

    Mr Pacha, it seems well nigh impossible to ask you learned gentlemen to discuss your positions sans insults and just deal wid the details…but alas I try, steeped as I am in ingrunce. So here I go again.

    Based on your “deep knowledge about this” of these subjects, can you detail how many projects in Barbados in the last five years (or ten) were backed by the government with a SG “to support projects which cannot stand on their own”.

    Of these how many would or could have been undertaken in the normal scope of public/private investment and thus the government “contort (ed) market conditions by insuring certain players against all risks, especially in a small open economy”.

    How did the government disrupt the investment landscape by the actions related to those projects?

    Your comments are quite incendiary of the face of it and as I said before speak well to the issue of possible government corruption and malfeasance which both you and Bushie have strongly voiced re these projects .

    But we are talking about a investment tactic of SG (or variance thereof) that has been used in small economies forever.

    Are you and Bushie suggesting that the credit union executives would have put the funding on the table to facilitate an Ionics deal or the SBRC deal?

    Are you saying that as a director of credit union funds you would have voted in favor of money going to this high risk venture “since we the people are taking all the risks, why not all the rewards.”

    Is your position that private investment opportunities existed for both deals and there were in fact viable ROI in 5 -10 years but Gov’t ‘chased’ those private funds from the market with their disruptive SG offer?

    This line of reasoning seems counter intuitive to the economics of a money hungry private investment industry. But maybe you know details that make both of them good profit opportunities.

    Similarly wid Stewart and his hotel. It’s either that Barbados was able to attract major hotel players who were keen to do anything to get a foothold on our island and government gave Butch a sweetheart deal in a corrupt and improper manner. And others like the credit unions or other local entity who were ready and willing to close a hotel deal with others were usurped. Or NOT!

    Of course a government guarantee by its very nature insurers the contracted party to some extent (or all) of their investment but otherwise I do not agree that the SG projects discussed “contorts market conditions …Those contortions are likely to limited investments, whatever the scale or scope, which have a normal risk profile”.

    Because these projects did NOT have a normal risk profile otherwise government WOULD NOT be involved unless they were ABSOLUTELY intent on CORRUPTION AND BRIBERY.

    Let’s get down to the fundamental economics and business issues and put aside the stupid insults.

  42. De Ingrunt Word Avatar
    De Ingrunt Word

    DD I was writing the long-wided piece as you posted, otherwise I would have simply cut and paste from your piece.

    I believe your commentary supports my original not grasping the point of Pacha’s position re this government giving sovereign guarantees on the projects discussed.

    Never said I did not understand the concept…but the criticism of it did NOT apply in these instances.

    Governments normally step in with SGs and all that goes with that when market conditions are NOT conducive to private investment.

    Was Butch’s contract or SBRC or IONICS for that matter normal risk profiles? Clearly not.

  43. Pachamama Avatar
    Pachamama

    D Ingrunt

    Again you miss the critical point.

    In your writings about credit unions you are suggested that we suggested that they were to be the ones to actually put up the money………..billions if necessary!

    You have made several more factual errors but we demire from covering them all.

    On the above issue, we are saying no such thing. All we are saying is that the credit unions could have been granted the SG and then seek to fund the project/s based on that SG, ie raising the money elsewhere. But ownership will be better held by the people asked to bear the risks.

    And we can go on and on but it’s impossible to remove the cobweb from your brain by implanting decades of skills gained through the practice and study of several professions. You see, with us, it goes beyond mere knowledge and exist in the province of wisdom.

  44. Wily Coyote Avatar
    Wily Coyote

    @David

    What makes you think that the government has suddenly got morals and has stopped raiding the NIS funds. The government would love to use NIS funds, the problem is the NIS FUNDS are depleted to such a level that that any more dipping/borrowing etc. may collapse NIS viability, no pensions etc.

    The government beggars are borrowing/stealing anywhere possible trying to stay financially afloat and running a misleading positive PR campaign (Tourist numbers increased to a 25 year high) (Governor of Central Bank maintaining he’s not losing any sleep) etc., etc. etc.

    Meanwhile the ship is taking on water and the pumps can’t keep up.

  45. Bush Tea Avatar
    Bush Tea

    @ Dee Word
    Are you and Bushie suggesting that the credit union executives would have put the funding on the table to facilitate an Ionics deal or the SBRC deal?
    ++++++++++++++++++++++++++++++++++++++++++++++
    Shiite man…. you seem to want to grow up to be just like Sargeant…
    Often, the expectation is that readers are able to read between the lines…
    What do you want? a full thesis with Lit review and the whole works…?

    Don’t be simple.
    What is being discussed is the political OPTION being taken to encourage, facilitate, support and entice ORDINARY Bajans who are willing to put in the sweat and capital to become INVESTORS, innovators and business moguls AS A MATTER OF NATIONAL POLICY.
    ….as against the diametrically OPPOSITE policy of secretly signing one-sided contracts with their political funders.

    …Now let Bushie know which part of THAT you fail to get….

  46. Due Diligence Avatar
    Due Diligence

    De Ingrunt Word June 12, 2015 at 1:32 PM

    Sorry if my long winded post was confusing

    It was my intention to reinforce Pacha.

    The Jamaican Investor clearly considered an investment too risky without the benefit of of the 40 year concessions – the value of which probably will amount to far more than the $25 million bond issue; assuming the Jamaican investor stays around (or is still around) for forty years.

    How can the other properties on the island going to compete if they are not extended the same concessions.?

    How are you and your grandchildren going to make up for that lost revenue?

    You say “Governments normally step in with SGs and all that goes with that when market conditions are NOT conducive to private investment.”

    And who do you think is responsible for market conditions in Barbados being NOT conducive to private investment?

  47. David Avatar
    David

    @Colonel

    Where is this nasty place? Not Barbados that is for sure!

  48. Colonel Buggy Avatar
    Colonel Buggy

    David its at the back of the NIS carpark, near the exit road from the British High Commission on to Lower Collymorerock

  49. Exclaimer Avatar
    Exclaimer

    Colonel Buggy June 12, 2015 at 12:46 PM,

    Your photo typifies all that is wrong in Barbados. The masses rush to invest their money in low interest bearing accounts, rather then invest their savings in potential business opportunities.

    The young man selling coconuts on the streets only sees value in the coconut water and discards the husks. The government will eventually collect those husks dumped on the streets and bury them in a landsite.

    Yet, no one asks the serious question: how can we develop an industry from the coconut.

    Education is wasted on us Bajans.

    Take a look at the PDF below.

    http://www.asa3.org/ASA/education/views/coconuts.pdf

  50. Colonel Buggy Avatar
    Colonel Buggy

    Exclaimer June 12, 2015 at 4:24 PM #
    And I cannot recall seeing a single coconut tree near Baylor University. In the past the innovative people in Barbados who would have developed an industry out of coconuts, or other products ,are those we would have referred to as “uneducated”. At the Cotton Factory there was a thriving business in Copra, and there were also coconut fibre used filling for beds, cushions,etc. A good start.
    But look at this . Its worth publishing again
    http://i.imgur.com/pEyUpi3.jpg?2

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