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Belize~ The wet paper bag banks

Posted: Tuesday, October 17, 2017. 1:54 pm CST.

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By Richard Harrison: Belize currently have 5 banks listed as “commercial banks” by the Central Bank of Belize.

These are Atlantic Bank, Belize Bank, Heritage Bank, National Bank and Scotia Bank.

All indications are that the entire banking system is in jeopardy…they hold properties as collateral that if their capital valuations are updated, the assets they hold are far less than the loans owed to these banks.

In other words….they are all WET PAPER BAGS.

When the WORLD FINANCIAL CRISIS started in 2008….the then Governor of the Central Bank said publicly that it would not affect Belize, and that Belize did not have to do any special adjustments to alleviate its effects on the economy. So…nothing was done.

The entire world made adjustments….pumped money into their economies….primarily to prevent asset values from falling too low, as a result of dumping and flooding of real estate markets….as those assets would become vital to collateralize the investments necessary for any recovery.

Many businesses and individuals faltered as a result of the crisis…and were not able to meet the same amount of monthly payments on their loans. Instead of working with the borrowers, by lowering interest rates, extending terms and making hair-cuts for those that qualify….which is exactly what the Government of Belize asked for and got from SuperBond creditors….they started the slash and burn that has brought us to this scandalous disaster.

Belize did completely the opposite of the rest of the world….the Central Bank of Belize and the commercial banks colluded to adopt a strategy of dumping the assets of hard working local and foreign investors…selling off their assets for between 50-60% of the banks’ own FORCED SALE VALUES (FSV).

Since then, the newspapers income from advertising auctions of foreclosed properties soared…and the balance sheets of many businesses and individuals crashed….so much so, that most investors do not have the collateral to reinvest and build back their businesses….most of the productive investors of Belize are currently on involuntary semi-retirement.

Indeed, most of those businesses auctioned off (or sold under the table by bankers to their families and friends) are now in the hands of the cash-rich vultures of money-laundering, drug and human trafficking and contraband/corruption. They together STOLE what people worked all their years to build.

BUT….every knife cuts both ways….and karma is a beach.

The banks thought they were winning, because they were not losing much from those transactions…indeed they were recouping in cash the value of the loans for the most part.

BECAUSE….they only loaned up to 60-70% of the value of those collateral….so they turned what they considered NON-PERFORMING LOANS into cash….using the automatic foreclosure rules that are in the small letters at the bottom of the SLASH AND BURN mortgage contracts that they are allowed by our antiquated colonial laws to make with borrowers.

HOWEVER….there is no opportunity that does not come without risk….this is natural law…and humans cannot circumvent it.

What the Central Bank of Belize and the commercial banks did not include in their calculations….is that you cannot sell off an asset at 50-60% of its FSV…without decreasing the value of all the assets in its surrounding area by the same amount.

The nature of capital valuations is such that each property is valued relative to other properties in the vicinity. If all the properties in an area are valued at around $10,000 per acre….and suddenly the bank sells one of those properties for $5,000 per acre….immediately, all the properties in that area falls to the new “market price” of $5,000 per acre.

So….most of the properties that the banks are currently holding as collateral….are only worth around 50-60% of the FSV that the banks have assigned on those properties…since they have undertaken to sell Belize off for cheap on LARGE SCALE….COUNTRYWIDE.

BUT….nobody wants to talk about this….especially the financial and economic geniuses that cooked up this strategy for Belize’s response to the World Financial Crisis….because they are hoping against hope that the situation can fix itself over time…that they can wish the situation away.

To give an example using the Belize Bank….on June 30, 2015….it held assets of $973m, liabilities of $885m and equity of $87m….with non-performing loans of 9.7% and provisions of 14.1%. By June 30, 2017, assets were $895m, liabilities were $810m and equity $84m…with non-performing loans of 2.4% and provisions of 5.8%. This bank is in deep jeopardy….and one has to ask “where did all the proceeds of payments made for BTL go?”…..”where did all the PetroCaribe money go?”…..they are not showing up in our Central Bank of Belize approved statements of the commercial banks.

If you look at the numbers for all the banks….it appears that Atlantic Bank has taken up most of the losses of Belize Bank and the consolidation of Heritage/FCIB….with Scotia Bank not moving much over the past two years. These shifts are principally cannibalism of loans refinanced using mostly the same valuations that underpinned them in a previous bank….done mostly for friends and favorites…the underlying problem loan/asset ratio >1 persists.

They have all been hiding losses and making “provisions” with the Central Bank….for the continuing decline in asset values….which remains unabated, as more people are reaching that crunch stage of need and selling off to stay alive or to keep their nose above water.

No new policy has been put in place to stop asset value decline…..so it continues.

The real estate agents and auctioneers are having a wonderful time….selling off assets for cheap…that does not say anything about their selling ability….it is the low market prices that is driving the market.

This slaughtering of businesses and individual investors capital….is one of the most cruel and reckless thing that has been done to Belize’s economy and Belizean families since 2008. It is worse than corruption….because corruption steals the taxes they pay….but this slaughtering breaks up families, takes food off tables and children out of school.

Some of the principal promoters of this disaster have already fled the coop with their large bonuses and retirement packages….but the excrement that they left behind continues to increase in stench.

This situation needs to be halted and reversed where possible….if Belize is to start making its way forward anytime soon.

No amount of selling off Belize to foreigners will “make Belize great again”…..Belize will only be as good as it rewards its investors for their hard work over the many years. To slaughter them because they came into a tough time….brought on by the World Financial Crisis….something they have absolutely no control over…is like cutting off your nose to spite your face.

Most of these decisions were made by people who have never started and/or built a business in Belize…but karma is coming to get them and their families….they have to re-valuate the entire stock of properties they hold as collateral for the loans on their books….and when this process is complete….they will all be seen to be what they have become under the stewardship of the SLASH AND BURN ARCHITECTS….they will be seen to be nothing more than WET PAPER BAGS.

The views expressed in this article are those of the writer and not necessarily those of Breaking Belize News.

This article was written by Richard Harrison, Belizean investor in production and services businesses in Belize. He holds a Master’s in Business Administration degree from Lancaster University.


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